ECONOMY

Greece turns away from EU bailout cash before Dijsselbloem visit

Finance Minister Yanis Varoufakis said he’s not interested in persuading Greece’s official creditors to release the final 7 billion euros ($8 billion) of bailout funds as Eurogroup Chief Jeroen Dijsselbloem headed to Athens for talks on Friday.

Greece wants to agree a new plan shifting from spending cuts to combating corruption and boosting public investment. The proposal hinges on the euro area and the European Central Bank agreeing to write down Greece’s public debt, a suggestion that has been met with skepticism by officials across the rest of Europe.

“We don’t want the 7 billion euros,” Varoufakis said in an interview with the New York Times published late on Thursday. “We want to sit down and rethink the whole program.”

By turning away from the bailout deal, Prime Minister Alexis Tsipras risks leaving the country’s banking system exposed as depositors withdraw their cash. The ECB only accepts junk-rated Greek assets in its financing operations because the government has submitted to a rescue program.

“In all honesty, if you sum up all their promises then the Greek budget will very quickly be out of balance and then further debt relief won’t help anyway,” Dijsselbloem said in Amsterdam on the eve of his trip. “We want to keep Greece in the euro zone, in the European Union, but that also requires the Greeks to meet their commitments.”

Risks Exaggerated

Greek stocks and bonds have stabilized after Tsipras’s January 25 election victory triggered a three-day rout that wiped as much as $11 billion from banking stocks. The benchmark Athens Stock Exchange rose 1 percent at 1:09 p.m. local, while yields on 10-year Greek bonds fell 21 basis points to 9.96 percent.

“When stories come out like this they are frequently exaggerated and the price gets beaten down,” Nobel Laureate and Yale University economics professor Robert Shiller, told Bloomberg TV. “Greece won’t exit” the euro area, Shiller said, “and they may even get a restructuring.”

European Parliament Martin Schulz confirmed the divide between Tsipras and the rest of Europe after two hours of talks with the Greek leader in Athens on Thursday.

“In diplomatic parlance, they say that talks were constructive and honest when they have ended in disagreement,” Schulz said. “Well, I will say that talks were honest and constructive.”

Even so, Schulz did win reassurances from Tsipras that he won’t take any “unilateral actions” without talking them through first with European officials

Troika Deal

The so-called troika of the International Monetary Fund, the ECB and the euro area have committed about 240 billion euros in emergency loans to Greece, in return for spending cuts and overhauls in the country’s labor and products markets. The measures exacerbated the steepest recession in living memory and catapulted anti-bailout Syriza party into

government, this week.

Syriza, an acronym for Coalition of the Radical Left, formed an alliance with right wing Independent Greeks party, whose leader, Panos Kammenos has said that euro area is being governed by German Neo-Nazis.

The new government doesn’t recognize troika bureaucrats as legitimate interlocutors, and wants a political agreement with euro area governments, which will include a “moratorium” on debt repayments, financing for the restructuring of the Greek economy, and the exclusion of public investment from deficit limit calculations.

Uncertainty over the country’s financing prospects under a Syriza-led government was already rattling depositors in the run-up to Sunday’s election. Deposit outflows accelerated to a euro-era record last week with 11 billion euros, about 7 percent of total deposits, leaving the system in January, according to a person familiar with the matter.

“Will Greece antagonize the European union? If they don’t there won’t be any problems,” Alvaro Nadal, chief economic adviser to the Spanish prime minister, said in a radio interview in Madrid on Friday. “If they do, there will be, on all fronts.”

[Bloomberg]