Greece\’s new leftist government and its international creditors failed to agree on a way forward on the country\’s unpopular bailout and will try again on Monday, with time running out for a financing deal.
In seven hours of crisis talks in Brussels that ended after midnight, euro zone finance ministers were unable to agree even a joint statement on the next procedural steps. Both sides played down the setback, insisting there had been no rupture.
But Greek stock prices, which whipped higher after hours in New York on talk of an accord, sagged with disappointment when it emerged that Greece\’s laconic new Finance Minister Yanis Varoufakis had walked away from a draft deal to extend current credit terms after conferring with fellow Greek officials.
"We had an intense discussion, constructive, covering a lot of ground, also making progress, but not enough progress yet to come to joint conclusions," Jeroen Dijsselbloem, the chairman of Eurogroup finance ministers, told a midnight news conference.
"We didn’t actually go into detailed proposals, we didn’t enter into negotiations on content of the program or a program, we simply tried to work next steps over the next couple days. We were unable to do that."
Greece would have no further contact with experts from the European Commission, the International Monetary Fund and the European Central Bank before Monday, he said. That was the opposite of how other EU ministers understood they had left matters when they headed home an hour or so earlier.
Looking as casually confident as when he had arrived at his first such talks, Varoufakis said: "Now we are proceeding to the next meeting on Monday. We hope that by the end of that one, there is going to be a conclusion in a manner that is optimal both for the perspective of Greece and our European partners."
Spelling out how Greek voters had rejected the "toxic" austerity dictated by international lenders that rescued Greece after the global financial crisis, he said he hoped for a "healing deal" on Monday and stressed that, while much remained undone, "not finding a solution is not in our rationale".
Diplomats said efforts to clinch a joint statement, as it went through drafts, were aborted after Varoufakis consulted government colleagues. A text seen by Reuters showed that the Eurogroup had wanted to agree on "extending" the present loan program – a phrase that is anathema to Athens.
Hard-left Prime Minister Alexis Tsipras, whose close ally Deputy Prime Minister Yannis Dragasakis sat beside the academic economist Varoufakis in the Eurogroup, has stuck to his guns. He knows those who voted him into office last month are insistent he end a bailout deal Greeks blame for worsening poverty.
Tsipras, who will meet fellow EU leaders at a summit in Brussels later on Thursday, rejects any extension of the 240 billion euro package, which expires on Feb. 28. He refuses to cooperate with the "troika" of EU/ECB/IMF officials overseeing Greece\’s finances and demands a "haircut" reducing its debt.
German Finance Minister Wolfgang Schaeuble has said that if Greece is not willing to request an extension of the current bailout – the biggest in financial history – "then that\’s it", appearing to rule out further assistance or debt forgiveness.
Financial markets have been on edge over the Greek crisis because of fears that failure to reach a deal soon could trigger a Greek default and a disorderly exit from the euro zone, possibly setting off wider market turmoil.
Asked whether a so-called "Grexit" was on the cards, Varoufakis told reporters on arrival: "Absolutely not."
He set out the new government\’s thinking on interim steps toward a negotiated debt restructuring but presented no formal document, to the surprise of some ministers, participants said.
"Positions are now a bit clearer, but there is a very long way to go in the coming days," said one EU source.
Keeping a close eye on a problem that could reprise some of the banking and financial market turmoil of three years ago, ECB chief Mario Draghi was present throughout the talks.
Athens\’s partners have warned that time is short since any changes to the current bailout may require ratification by several national parliaments in creditor countries.
Varoufakis and his delegation had a prior meeting with International Monetary Fund chief Christine Lagarde, who flew to Brussels to join the talks in a sign of the IMF\’s concern about the Greek crisis, which is weighing on global financial markets.
"They are competent, intelligent, they\’ve thought about their issues. We have to listen to them, we are starting to work together and it is a process that is starting and is going to last a certain time," Lagarde told reporters.
In Athens, a Greek official said Varoufakis had discussed with Lagarde and Dijsselbloem some form of "bridge agreement" for funding the state once the current bailout deal expires.
Meeting his counterparts collectively for the first time, Varoufakis worked the room before talks started, shaking hands first with Schaeuble, then others. He looked relaxed in a designer checked scarf and his trademark open-neck shirt.
Economists polled by Reuters this week estimated a one-in-four chance of Greece leaving the 19-nation single currency area this year – the highest reading since the start of the Greek debt crisis in late 2009.
Most analysts believe the odds still favor an agreement between Greece and the euro zone emerging later this month after lots of sound and fury.
"We think that the European community and Greek authorities will reach a compromise such that there will not be an exit of Greece from the euro zone," said James McCormack of credit ratings agency Fitch Ratings.
European Union leaders will take up the issue at their first summit with Tsipras on Thursday. EU officials said they would be briefed on the Eurogroup talks but there would be no room for debt negotiation at a summit mostly devoted to the Ukraine-Russia conflict and fighting terrorism.
At least 10,000 Greeks took to the streets of Athens and other cities on Wednesday to demonstrate support for Tsipras\’s government in the Brussels negotiations. Smaller leftist satellite rallies were planned in Brussels, outside the European Central Bank in Frankfurt and in London.
Protesters outside parliament in central Athens unfurled banners proclaiming "Bankrupt but Free" and "Stop Austerity".
Tsipras tweeted a picture of the rally, with the message: "In the cities of Greece and Europe the people are fighting the negotiation battle. They are our strength."
Varoufakis has proposed a six-month transition in which Greece would be allowed to issue more short-term debt, receive the proceeds of ECB holdings of Greek bonds and tap unused bank rescue funds while renegotiating its debt. Athens would swap its euro zone loans for GDP-linked bonds and its ECB-held debt for interest-bearing perpetual bonds with no reimbursement date.
EU officials have said the most Greece can expect is a further extension of the repayment deadline for its euro zone loans, a lower interest rate and perhaps a prolonged moratorium on debt service payments, in return for continued reforms under some form of external supervision.