Germany accuses Greeks of ‘Trojan horse’ tactics over bail-out deal
Syriza’s proposal for bail-out extension is rejected as insufficient by Berlin before crunch talks tomorrow 
Photo: Milos Bicanski/Getty Images
• Greece reported to have accepted €172bn bail-out extension as “legally binding”
• Berlin rebuffs proposals dubbing them a “Trojan Horse”
• Greek stocks trade flat after recovering losses
• ECB forced to deny reports it has discussed capital controls
18.45
Germany to Greece:
— Lady FOHF (@LadyFOHF) February 19, 2015
18.40 Another German demand: they think Greek banks are solvent enough to no longer require a €10.9bn buffer from Europe’s financial stability fund.
The Greeks would argue otherwise. Deposit withdrawals have accelerated in recent weeks and although the ECB has moved to increase its cap on emergency support for lenders, this is not guaranteed until after the end of the month.
Conscious of the precarious position of its banks, Greece are now calling for the central bank to start accepting Greek bonds as collateral for cheap loans. This was removed earlier this month as debt talks stalled.
Most surprising #Germany euro working group demand: return €10.9bn in EFSF bonds now in #Greece bank bailout fund even if prog extended
— Peter Spiegel (@SpiegelPeter) February 19, 2015
18.22 One interpretation of that German ‘Trojan Horse’ response
Berlin basically wants Tsipras to denounce that big speech he gave to Greek Parliament the other day
— Mats Persson (@matsJpersson) February 19, 2015
18.20 Here’s what the immediate financial future for Greece looks like.
Athens is due to pay back IMF loans of just under €2bn in the next two months, as well as the redemptions of its short-term debt. The first bond repayments to the ECB are due in July and August.
#Greekdebt redemptions in 2015 http://t.co/u5RWKzj6gj @SMerler
— Bruegel (@Bruegel_org) February 19, 2015
18.15 Contra those Trojan horse claims, Greek PM Alexis Tsipras has said he had “positive” and “interesting” talks with Angela Merkel today.
Phone call w/Chancellor #Merkel earlier today: positive tone, and interest in finding a mutually beneficial solution for #Greece & #Eurozone
— Alexis Tsipras (@tsipras_eu) February 19, 2015
18.05 What Greece wants from the Germans (from the letter below):
“Three short and well understandable sentences: We apply for the extension of the current programme; we will agree with the institutions any changes in measurs from the existing MoU. And we aim at successfilly concluding the programme.”
18.04 Sky’s Ed Conway has got hold of the Germans response to Greece’s plans to extend its loan.
It states Greece has made “no clear commitment to successfully conclude the current programme” and it remains “totally unclear how the Greek government wants to pay its bills over the coming weeks.”
It’s in full below:
“It makes no sense to start drafting a Eurogroup statement on Friday”. Leaked German notes on today’s Greek letter:
— Ed Conway (@EdConwaySky) February 19, 2015
17.50 Should Greece fail to renegotiate a deal before the end of the month, Greek banks stands to lose around €10.9bn from Europe’s bank stability fund.
A German official quoted by the Wall Street Journal has now said this crucial buffer for Greek lenders should not be continued.
Germany Says EUR10.9B in Bank Bailout Money from Current Program Shouldn’t Be Extended–Greek Official via @WSJ
— Viktoria Dendrinou (@v_dendrinou) February 19, 2015
17.35 Chancellor Merkel will not be an attendee at tomorrow’s Eurogroup meeting (it’s just for the bloc’s finance ministers) but will be meeting Francois Hollande during the day.
But Ms Merkel also been in communication with her Greek counterpart, Alexis Tsipras according to local media. It was all very amicable, if reports are believed.
* Greek PM tsipras and German chancellor Merkel held a “constructive” phone conversation on Thursday – Greek government official – RTRS
— Fabrizio Goria (@FGoria) February 19, 2015
17.25
Many Trojan horses, not enough Trojans.
— Yannis Koutsomitis (@YanniKouts) February 19, 2015
17.20 A flavour of the showdow between Germany and the rest earlier today. From the FT’s Brussels bureau chief:
In euro working group, #Germany rep said #Greek letter amounted to “a Trojan horse” to get bridge financing through back door
— Peter Spiegel (@SpiegelPeter) February 19, 2015
In € working grp, #Germany wanted 3 line #Greece letter: We apply for extension. All changes negotiated w/institutions. We’ll complete prog
— Peter Spiegel (@SpiegelPeter) February 19, 2015
17.15 The deadline on Greece’s current bail-out expires on February 28. But the country faces a harder deadline to conclude talks in mid-March when it is due to payback part of its IMF loan.
According to some reports, Greece will run out cash in a matter of weeks without a new deal. This has led to Syriza demanding a “bridging loan” which would help keep the country afloat while it carries out the renegotiation on the terms of its financial aid.
1 What’s missing from Greece’s letter is how it will avoid going bust next month.
— Hugo Dixon (@Hugodixon) February 19, 2015
2 Letter doesn’t say Greece wants cash from current bailout program, which Germany could legitimately resist if Greece doesn’t implement it
— Hugo Dixon (@Hugodixon) February 19, 2015
3 best solution to avoid short term cash crunch is let Greece issue more t-bills. That doesn’t require it to fulfil old program’s conditions
— Hugo Dixon (@Hugodixon) February 19, 2015
16.50 Key German ally, Finland has repeated the German mantra that Athens’ proposals are “not sufficient”. From their PM Alexander Stubb:
* Finnish PM stubb says Greece proposal not sufficient – RTRS
— Fabrizio Goria (@FGoria) February 19, 2015
16.45 The contours of any potential agreement between Greece and the Germans is looking a little bit clearer now.
Germany seems to be objecting to the rather vague comittment to fiscal targets set out by Athens in its letter to the Eurogroup today.
Now another Germany economics minister has told Reuters, Berlin wants some concrete proposals for reform from Syriza.
* Germany’s econ minister says key is the question of what reforms Greece needs to undertake – RTRS
— Fabrizio Goria (@FGoria) February 19, 2015
* Germany’s econ minister says advises against ultimatums, either-or positions are not particularly helpful – RTRS
— Fabrizio Goria (@FGoria) February 19, 2015
16.40 In a sign the EU is willing to offer some flexibility to Greece, vice president of the European Commission, Valdis Dombrovskis has said the best way forward is for Greece to extend the bail-out, but that some measures could be replaced with new fiscal targets.
In its proposal to Brussels earlier today, Yanis Varoufakis signed off on a letter which said Greece would aim to: “attain appropriate primary fiscal surpluses, guarantee debt stability and assist in the attainment of fiscal targets for 2015 that take into account the present economic situation.”
Greece is currently required to reach a 3pc primary budget surplus after debt repayments are taken in to account in 2014. This rises to 4.5pc for the next two years and imposes a serious fiscal constraint on the government.
16.20 Despite that seback from Germany, Greece’s deputy PM has tweeted he remains hopeful Athens’ proposals can still form the basis of an agreement with creditors tomorrow.
Deputy Prime Minister Yiannis #Dragasakis : “There are forces that want #Greece on its knees in order to impose their will”
— Kathimerini English (@ekathimerini) February 19, 2015
#Greece DepPM Dragasakis tweets that “conditions are there for a mutually beneficial agrmnt at tomorrow’s Eurogroup” https://t.co/2arICqF2SY
— Yannis Koutsomitis (@YanniKouts) February 19, 2015
16.15 Confirmation that the eurozone’s finance ministers will be convening for an emergency meeting in Brussels tomorrow.
It all kicks off around 2pm British time. More worrying, the scheduled press conference is ‘TBC’. I’m calling it a midnighter at the very earliest.
16.10 Some context to the Greek crisis. The country has undergone the worst economic contraction in Europe since the financial crisis, losing more than 25pc of its national output. These are the sorts of levels last seen in the US during Great Depression.
Greece’s new government is now demanding an end to at least a third of the austerity reforms required under its current programme. These include deregulating its labour market, privatising the country’s ports, and reforming its pensions system.
Here are another eight charts that sum up the woes of the Greek economy.
15.50 The International Monetary Fund should not be forgotten in these negotiations between Greece and Europe.
Greece is due to pay back €1.5bn to the Fund next month. The IMF has now said it is ready to work with Greece and its partners to thrash out a negotiation.
More confusingly however, it has also said Greece has not in fact asked for an extension of its current programme.
Hmmm…
IMF spoxman says Greece has not asked for an extension to its aid programme, stating that their loans are nothing to do with the talks on EZ
— Fabrizio Goria (@FGoria) February 19, 2015
15.45 Earlier today we bought you comments from German vice chancellor, Sigmar Gabriel suggesting a split between his SPD party and their larger coalition partners, the CDU over Greece’s position.
Now, a spokesman for Belgium’s finance ministry has reaffirmed the tough creditor line. Here’s Johan Van Overtveld on why Athens position is still a problem for the eurogroup.
The Greek demand for an extension of the programme is the only possible step. This had to be taken. We have received the request, and will study it. But at first reading it appears that the concerns of the Eurogroup have not been addressed .
15.38 Capital Economics are predicting a “a seismic reaction across global markets” to the possibility of a Grexit.
They think markets so far have under-estimated the chaos that could come from Greece leaving the bloc, as “the mechanisms in place to prevent contagion are not as robust as many think.”
Most European equities are trading flat for the day
15.27
If Greece is going to get anywhere it needs to threaten #Grexit . It’s the only real weapon it has in this negotiation
— Bruno Waterfield (@BrunoBrussels) February 19, 2015
15.25 Are Grexit fears actually over done? One gauge of eurozone sentiment seems to suggest so. Consumer confidence data for the bloc for February showed an improvement from -8.5 in January to -6.7 this month.
Europeans are being boosted by low fuel prices and rising stock markets. Greece doesn’t seem to weighing too highly in their list of concerns (yet).
In contrast to everyone on Twitter, euro-area consumers seem largely unconcerned about Grexit. Bodes well for Q1 GDP.
— David Powell (@davidjpowell24) February 19, 2015
15.20 Greek stocks have recovered from an earlier precipitous fall and are trading around 1pc higher so far today
Greek stocks today: Guess when Germany said “no”…
— Richard Barley (@RichardBarley1) February 19, 2015
15.15 The Slovakian PM Robert Fico has spoken to the Financial Times. And his comments reflect the tough stance Germany’s eurozone allies are taking with Greece.
Mr Fico say the demands of the Greek government are “impossible” and that he should not have to explain to his public why his relatively poor country should have to stump up the cost for Syriza’s election promises.
His quotes in full:
It would be impossible to explain to the public that ‘poor’ Slovakia…should compensate Greece. To explain to people that we have to give money to Greece for their salaries and pensions? Impossible. Impossible.
It is not possible that on one hand they [the Greek government] want to cut debt or they want, for instance, to prolong loans. And at the same time they declare that they will give energy free of charge to people. Or give accommodation free of charge to people. It is not possible.
15.10 Deutsche Bank have released this timeline of crucial Greek dates to come:
Friday February 20– Emergency Eurogroup at 2pm London time to discuss Greece and end of deadline to apply for program extension
Friday February 20 – Merkel – Hollande meeting
Tuesday February 24 – €595m of bond interest/principal due
Week of February 23 – ELA capacity likely reached, another renewal required
Saturday February 28 – Current EFSF program expires
6 March – €297m IMF repayment due / €1.2bn t-bill matures
13 March – €334m IMF repayment due / €1.6bn t-bill matures
16 March – €556m IMF repayment due
20 March – €334m IMF repayment due / €111m bond interest/principal due / €1.6bn t-bill matures
14.40 The crucial task now facing the Greek administration is to thrash out a compromise with its fellow member states, particularly those in the northern creditor countries, rather than dealing with the EU, according to Holger Schmieding, at Berenberg.
His words:
The issue is not to get the nod from Brussels where Commission president Juncker called the Varoufakis letter “a positive sign” and suggested that it could “pave the way for a reasonable compromise”.
Instead, the bottleneck for Greece is to convince the finance ministers of Finland, Slovakia, Germany, The Netherlands, Portugal and others to keep funding Greece and to present such a proposal to their national parliaments.
Greece is running out of time and money. Having already come part of the way, Greece may well move further and accept the current programme as the basis for all further discussions at the Eurogroup meeting Friday.
Changing just parts of the request Greece has now submitted may suffice for that. But completing Greece’s inevitable U-turn that fast will be tough for its double-populist coalition, to put it mildly.
14.37 Sounds of an ultimatum now emerging from Athens before tomorrow’s crunch meeting
#Greece govt says Eurogroup now has two choices: either to approve or reject the Gr request
— Efthimia Efthimiou (@EfiEfthimiou) February 19, 2015
14.36 Paul Mason, channel 4’s economics editor, has called the proposal tabled by Greece to the eurozone today as: ” a compromise wrought out of exhaustion and the implicit threat from the ECB to pull the plug on Greek banks as early as next Wednesday.
“It still left Greece a lot of room for manoeuvre to do its domestic programme, as all departures from the memorandum, which mandates the austerity programme of the old government, would become matters of interpretation.”
But as many others are noting today, that “room for manoevure” is what is irking Germany who seem to fear the Greeks will use the flexibility to go back on their previous commitments to meet their budget targets.
14.20 The head of Germany’s Social Democrat party has warned of making any judgement on Greece’s plans “too quickly”.
Sigmar Gabriel is quoted as saying there are “reasons why we can’t say yes to Greek proposals” but that the plans made by Athens “should be financed by the Greeks themselves.”
This is the first time we’ve heard from a senior German official other than the finance minister spokesman today.
This less staunch position from Mrs Merkel’s biggest coalition ally suggests splits might be opening up in the German government over how best to proceed with negotiations.
#Germany EconMin Gabriel: Cannot Shut Door Now On Talks W #Greece ; Have Reasons Why We Cannot Say Yes To Greek Proposals ~BBG
— Yannis Koutsomitis (@YanniKouts) February 19, 2015
14.10 The eurozone’s finance ministers will meet in Brussels at 3pm tomorrow to try and thrash out a deal for Greece before the end of the month.
The FT’s Brussel’s bureau chief thinks the Germans will turn up and demand some more concessions from Greece’s extension submission.
. @JarnoHa My understanding of #Germany stance is: “Not as good as it now stands”. They will still try to change #Greece letter at #eurogruop
— Peter Spiegel (@SpiegelPeter) February 19, 2015
. @Haris_Xenarios Paragraph (a) of letter, which seems to leave main points open to negotiation, appears to be main #Germany objection
— Peter Spiegel (@SpiegelPeter) February 19, 2015
14.00
Paragraph (a) of #Greece letter to #Eurogroup leaves specific reform measures open to negotiation. This is main #Germany objection.
— Doug Rediker (@DougRediker) February 19, 2015
13.40 A reminder from our Brussels correspondent Bruno Waterfield about just how contentious this dispute over budget targets is for both Germany and Greece’s new government. It’s a wrangling which goes back to commitments first made in 2012.
There’s a key line in the Monday Eurogroup draft agreement that Greece refused to sign up to.
Here it is: “The Greek authorities are committed to ensure appropriate primary fiscal surpluses and financing in order to guarantee debt sustainability in line with the targets agreed in the November 2012 eurogroup statement.”
Germany seems to be sticking by that 2012 agreement, particularly the target for a 3pc primary budget surplus in 2015 and 4.5pc in 2016.
It is not just totemic for Berlin.
Writing three days after the 2012 agreement, Yanis Varoufakis, now Greek finance minister, famously described the targets set out in it as “fiscal waterboarding”.
He did not mince his words.
So, what will come of Greece, given the latest Eurogroup ‘decision’? It is my fear, and belief, that the country is becoming a version of Kosovo – a protectorate in which the euro remains the currency, sovereignty is minimal, the population is ruled over by a glorified kleptocracy with strong links to Berlin and, last but not least, a permanent migratory flow is established that sees the young and the skilled move to northern Europe and beyond .
Will Germany climb down? It is hard to see how Mr Varoufakis can.
Berlin is demanding he acquiesces to the very targets he described as “fiscal waterboarding”. More eurozone torture.
13.33 Yields on Greek government debt spiked immediately after the news from Germany. They’ve now fallen back a little, but are still up 1.4pc so far today.
13.24 Despite the German kybosh, the European Commission still thinks there is room for a “reasonable compromise” between Greece and its creditors, according to spokesman Margaritis Schinas (who is Greek incidentally).
13.15 Channel 4’s economics editor Paul Mason, says the Greeks feel they have been “set up” after their initial moves towards a compromise
Dijsselbloem clearly agreed to the Varoufakis letter, or why call EG? Greeks feeling “set up” as Germans reject (1/2)…
— Paul Mason (@paulmasonnews) February 19, 2015
(2/2) and @Varoufakis climbdown on wording was supposed to be first phase of two part compromise, with Eurogroup reciprocating.
— Paul Mason (@paulmasonnews) February 19, 2015
13.12 Notable that there’s been radio silence from the rest of the eurozone or the European institutions after Germany’s torpedo.
Be interesting to get someone in an official capacity who is not German or Greek to comment on this morning’s fun and games? De Guindos?
— World First (@World_First) February 19, 2015
13.10 There are already some German calls for the re-introduction of the drachma in Greece.
The eurosceptic Alternative for Germany party (AfD), who defeated Angela Merkel’s CDU in regional elections earlier this month, will likely be pleased with developments today.
Their rise as a new party is representative of the hardened position among some Germans that indebted countries should be forced to pay back all their liabilities or be thrown out of the union for good.
Leader of Germany’s anti-euro #AfD , responds to Berlins rejection of Athens letter: Handle non-cash payments in Greece w/ “new Drachma.”
— Open Europe (@OpenEurope) February 19, 2015
13.05
Remember when Varoufakis said they didn’t even agree to disagree? Seems to be prescient. Germany rejecting entire premise of negotiation.
— Joseph Weisenthal (@TheStalwart) February 19, 2015
13.00 Uncompromising from today’s Bild
CDU getting the headlines they need. This opens up space for flexibility in future if they want to use it
— Alex White (@AlexWhite1812) February 19, 2015
12.58 Today’s statement from Germany came from Martin Jäger, a spokesperson for the German Finance Ministry.
According to Mr Jäger, Athens’ letter “does not correlate to the criterion agree on Monday’s Eurogroup.”
A more senior German official, in the form of the finance minister Wolfgang Schaeuble or even Angela Merkel have yet to say anything about developments. That could well be a source of hope in this stand-off.
Before that statement was released, there were reports from Germany’s SPD politicians saying they were now ready to negotiate with Athens.
Watch this space.
12.50 One of the elements in Greece’s proposal that could be irking the Germans is the commitment for Athens to run a budget surplus of 3pc this year, followed by 4.5pc in the following two years.
In their submission to Brussels, Sryzia said they would seek “appropriate” fiscal targets. The ambiguity of that wording may suggest to Berlin the Greeks want relaxation of their budgets targets. Yanis Varoufakis has previously demanded around 1.5pc – which would allow the country some more spending wiggle room to fulfil election promises.
Germany says “nein”.
@edwardnh @ohanasteve Greece will not accept 3% in 2015. If EMU insists, end of EMU
— A Evans-Pritchard (@AmbroseEP) February 19, 2015
12.45
GREECE OFFICIAL: NEWS OF LIKELY DEAL IS HIGHLY SPECULATIVE, GERMANY STILL STANDS FAR APART ON GREEK CONDITIONS – MNI
— Fabrizio Goria (@FGoria) February 19, 2015
12.40 Spot the moment Greece’s proposal was kyboshed by Berlin (Athens Stock Market today)
12.32 Germany: how to lose creditor friends and influence not that very many people (sort of)
So are the finance ministers of France, Italy, and so forth really going to side with the Germans here?
— Joseph Weisenthal (@TheStalwart) February 19, 2015
*If* we now get a deal on the basis of today’s Greek draft – what would have looked like a clear German win will now look like a defeat.
— Duncan Weldon (@DuncanWeldon) February 19, 2015
12.28 Markets are topsy turvy today. The initial optimism has just been blown out of the water.
#Greece Athens stock exchange from +4.29%, now -0.60% in less than 10 minutes
— Efthimia Efthimiou (@EfiEfthimiou) February 19, 2015
12.22
The Germans are going a step too far. Greece will now find many supporters. Germany risks Eurozone crisis.
— Yannis Koutsomitis (@YanniKouts) February 19, 2015
12.20 So those early hopes of a compromise between Greece and its creditors has hit a major snag.
A German government official is quoted as saying the proposal from Athens means the country is still asking for a form of “bridge financing” without sufficient conditions attached.
Game-on.
12.16 Spanner in the works.
*GERMANY REJECTS GREEK EXTENSION PROPOSAL, GOVT OFFICIAL SAYS
— lemasabachthani (@lemasabachthani) February 19, 2015
*GREEK PLAN SEEKS BRIDGE FUNDING W/O FULFILLING PROGRAM: JAEGER
— lemasabachthani (@lemasabachthani) February 19, 2015
*GREEK PLAN SEEKS BRIDGE FUNDING W/O FULFILLING PROGRAM: JAEGER
— lemasabachthani (@lemasabachthani) February 19, 2015
12.10 If Greece had conceded some significant ground to the EU, it could now lead the way for its creditors to provide the “flexibility” they have previously offered the country as long as it remained in the programme.
This was the main message coming from the head of the eurogroup on Monday, and if the country has blinked, it sounds like even some German officials are now predisposed to offer the country some wiggle room.
SENIOR GERMAN SOCIAL DEMOCRAT EUROGROUP CAN NOW CONSIDER HOW TO EASE BURDEN ON GREECE / BOOM!!!
— Pauly@spz_trader (@spz_trader) February 19, 2015
12.05 Is this letter a breakthrough or are the Greeks standing their ground and couching it in more conciliatory language? Opinion is split
Fight still to be had: ‘appropriate primary fiscal surpluses… assist in attainment of targets take into account present economic situation’
— Bruno Waterfield (@BrunoBrussels) February 19, 2015
Fight still to be had: ‘appropriate primary fiscal surpluses… assist in attainment of targets take into account present economic situation’
— Bruno Waterfield (@BrunoBrussels) February 19, 2015
Juncker: “sees this letter as a positive sign, which, in his assessment, could pave the way for a reasonable compromise”
— Duncan Weldon (@DuncanWeldon) February 19, 2015
If latest reports are true, Greek gov’t has basically capitulated. Domestic political fallout will be interesting to watch. #Greece
— Vincenzo Scarpetta (@LondonerVince) February 19, 2015
12.00 A text of Greece’s proposal made to Brussels has been released in full HERE .
The areas of dispute seem to centre around the wording of the following:
The purpose of the requested six-month extension of the Agreement’s duration is:
(a) To agree the mutually acceptable financial and administrative terms the implementation of which, in collaboration with the institutions, will stabilise Greece’s fiscal position, attain appropriate primary fiscal surpluses , guarantee debt stability and assist in the attainment of fiscal targets for 2015 that take into account the present economic situation.
(b) To ensure, working closely with our European and international partners, that any new measures be fully funded while refraining from unilateral action that would undermine the fiscal targets, economic recovery and financial stability.
According to one interpretation, the commitment to attain a ” appropriate ” fiscal target means Greece is still demanding a relaxation from a 4.5pc of GDP target to the 1.5pc they need to carry out their election promises.
But the latter clause which refers to “refraining from unilateral action that could undermine fiscal targets ” suggests the government will in fact abide by the current rules.
EU semantics in full play, but neither side will want to look as if they have conceded too much in the negotiations.
11.55 Greek government sources have denied reports they are willing to accept an extension of the bail-out agreement.
This has been the main sticking point with the EU and IMF, with the current government refusing to stick by austerity reforms which it feels has led to a humanitarian crisis in the country.
11.40 Hello and welcome to live coverage of today’s developments between Greece and its creditors.
According to reports, the Greek government has submitted to an extension of its current bail-out programme, and will trigger an emergency meeting of the eurozone’s finance ministers tomorrow.
Reuters are reporting the Syriza government will accept previously controversial targets imposed by its creditors to run a budget surplus, and will accept monitoring from the ‘Institutions’ (formerly known as the Tro).
Should this be the case, it would mark a siginficant climbdown for tthe new government and raise hopes an agreement will be reached before the expiry date of February 28.