Germany’s finance minister took a tough line against Greece over its bailout on Tuesday, tempering market hopes that a deal between Athens and its European creditors was in the works.
Wolfgang Schaeuble warned that negotiations with Greece, which wants to scrap its bailout program in favor of a new one with easier terms, would be dead if Athens pulls out of the current program.
He also said there was no chance of reaching a final deal at an emergency eurozone finance ministers’ meeting on Wednesday.
The blunt comments tempered hopes in financial markets, which had rallied on Tuesday on hopes of a negotiation breakthrough between lenders and the country’s new left-wing government.
“The public statements (by Greece) are more confusing than helpful,” Schaeuble said, speaking in Istanbul, Turkey after a meeting of Group of 20 finance ministers.
Greece’s new left-wing Prime Minister Alexis Tsipras won elections last month on a pledge to restructure massive bailout debts and renegotiate the terms of the deal. The current bailout program ends after Feb. 28, so both sides are under pressure to reach a deal.
Greece needs money to avoid bankruptcy, which could ultimately push it out of the eurozone and force it to adopt a new currency — a development that would cause massive financial damage for the country, at least in the short term. For the eurozone, an exit from the euro by Greece would bring huge market uncertainty.
Expectations that Greece could be granted extra time to hold new negotiations buoyed markets. Shares on the Athens Stock Exchange shot up nearly 8 percent, while the European Stoxx 600 index was up 0.5 percent.
“There are several reasons to be optimistic, starting with Europes track record over the past few years of finding a solution to the rolling eurozone crisis, often in the final moments,” said Garrick Hileman, an economic historian at the London School of Economics.
EU officials likewise suggested a final deal would not be reached at this week’s meetings.
EU Commission spokeswoman Mina Andreeva said Wednesday’s meetings will be a first opportunity for the ministers to hear from the new government. That meeting will be followed by an EU leaders’ summit on Thursday.
The eurozone finance ministers convene again next Monday in Brussels, hoping to find a breakthrough at that stage. [AP]