Varoufakis fails to narrow divide with Schaeuble over austerity

The first direct talks between Greece and Germany since a new anti-bailout government took power in Athens last week yielded no agreement on how to narrow their differences.

German Finance Minister Wolfgang Schaeuble said he and his Greek counterpart, Yanis Varoufakis, “agreed to disagree” in their Berlin meeting. “We didn’t even agree to disagree from where I’m standing,” Varoufakis responded.

Their encounter came hours after Greece lost a critical funding artery when the ECB restricted loans to its financial system. That raised pressure on the 10-day-old government to yield to German-led austerity demands to stay in the euro zone.

The Greek government “remains unwavering in the goals of its social salvation program, approved by the vote of the Greek people,” according to a Finance Ministry statement issued overnight. Its aim is “coming up with a European policy that will definitively put an end to the now self-perpetuating crisis of the Greek social economy.”

The next move is up to Prime Minister Alexis Tsipras, who swept to power promising to reverse five years of spending cuts that accompanied 240 billion euros ($272 billion) of bailout loans. While he’s retreated from demands for a debt writedown, he’s so far sticking to promises to increase pensions and wages that breach the conditions for financial aid.

Bridging Program

Tsipras is scheduled to speak to his lawmakers in Athens on Thursday afternoon as parliament convenes. German Chancellor Angela Merkel has also agreed to meet the Greek leader, French President Francois Hollande said Thursday.

Varoufakis said Greece is looking for a financial lifeline to keep the country afloat for four months while it negotiates a “new contract” with the rest of the euro region.

“Our proposal is that there should be a bridging program between now and the end of May that will give us space to carry out these deliberations and in a short space of time come to an agreement,” Varoufakis said. He added that Greece wants a deal that will end the country’s crisis once and for all.

Schaeuble bristled at the Greek finance chief’s announcement last week that he was abandoning the country’s existing bailout deal and poured cold water on Greece’s calls for a debt restructuring and its plans to reverse austerity.

“I am skeptical of many of the advertised measures — they aren’t going in the right direction,” Schaeuble said. “The currently running program, when that program should be altered, then there has to be an agreement on that.”