Greek Debt Talks Collapse But Support At Home Never Been Stronger

Yanis Varoufakis
REUTERS/Marko Djurica

Greece is on a collision course with senior  officials of the Eurozone after refusing to be bullied during debt financing talks.

The newly-elected leftwing Syriza government reacted with fury to demands that the country stick to the austerity plan which were the terms of the bail out, the Telegraph reports.

Yanis Varoufakis, the Greek finance minister, said his party had won a landslide election by promising to overthrow the EU-IMF Troika and it could not back down on its promise.

“It would be an act of subterfuge to promise our partners that we will complete a programme we were elected to challenge.”

And he attacked the single minded determination of the eurogroup to stick to austerity measures despite a lack of growth inward investment or any sign that the Greek economy was able to survive in a monetary policy which included countries such as Germany and the Netherlands.

“This programme has failed to stabilise Greece, has generated a major humanitarian crisis, and has led to a debt deflationary spiral,” he said, although pledging to reach an “honourable settlement”.

But despite the aim of polite discourse, the Syriza government described the draft text as “absurd and unacceptable” with Mr Varoufakis saying there needed to be a “new contract for growth” instead of returning to old demands.

“The only way to solve Greece is to treat us like equals; not a debt colony,” he said.

After four hours of passionate negotiations, the talks were halted, risking a show down between the Eurozone and Greece.

Should Greece renege on the deal made by a previous government, it would be the biggest default in the world history and also show that the euro is not a permanent currency but something that can be abandoned should it not suit.

Jeroen Dijsselbloem, the head of the Eurogroup, was unbending in his views that Greece “honour its obligations”. “They have to make up their minds,” he said, leaving the door open for another meeting on Friday which needs to reach an agreement if Greece isn’t to exit the single currency.

A statement from the eurogroup was furiously annotated by Mr Varoufakis who crossed out the words, “the Greek authorities have indicated that they intend to successfully conclude the programme taking into account the new government’s plans”.

Part of the dispute appears semantic but feelings run deep on both sides with this being a test case for the single currency and an indication to other countries of just how much control they have given up when they joined the European Monetary Union.

The text said the Greeks must toe the line on “tax policy, privatisation, labour market reforms, financial sector and pensions”. Greece must continue with “fiscal surpluses” imposed by the troika which has set levels of a budget surplus of 1.5 percent of GDP in 2015 to 3 per cent in 2015 and 4.5 per cent next year. Syriza is demanding that it be frozen at 1.5 percent, which has been backed by the US who said fiscal consolidation had already gone far enough.

This diktat would stop Syriza from carrying out the economic reforms which were a cornerstone of its manifesto and essentially mean the Eurogroup could discard the manifesto of an elected government.

But as well as having serious implications in Greece, Germany fears that if it loosens the reins on austerity then others will follow, with the increasingly popular sister parties to Syriza in Spain, Portugal and Italy insisting that their bail out terms are changed.

But Brussels would be foolish to think that this is all a question of game theory rather than genuine political principles. Writing in The New York Times, Mr Varoufakis said, “The lines that we have presented as red will not be crossed.”

And if Syriza want to secure those changes, they need to stick fast at the beginning of their government, knowing that 81 per cent back their refusal to buckle under pressure and that there would be no need for a coalition should fresh elections be held.

UKIP Deputy Leader Paul Nuttall sent a warning to the eurogroup, telling them to “take their boots of Athens’s neck.”

“It is time for the EU to stop treating the Greek people like debt slaves. They are a people who have suffered severe hardship for many years now, who want a better future and their democratic decision to be respected.

“Outside the EU austerity programme there will be hardship but at least there is a reason to hope for a brighter economic future.”

And Socialist Vice President Maria Joao Rodrigues said, “Instead of escalating the stand-off, the Eurogroup should come to its senses and consider that the largely reasonable proposals of the new Greek government should come with an open mind. Greece cannot become a highly competitive country if 20 per cent of its population suffers from severe material deprivation…the Eurogroup should learn from its mistakes instead of repeating them.”