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Greece on the agenda - again

Bernd Riegert / dbMarch 17, 2015

Instead of looking at plans for a European Energy Union, an EU summit later this week is set to deal with Greece and its financial woes yet again. Bernd Riegert filed this report from Brussels.

Alexis Tsipras, Jean-Claude Juncker
Image: Reuters/Y. Herman

Greek Prime Minister Alexis Tsipras prevailed after all: it looks like he's being given the opportunity to address the Greek debt crisis at the upcoming EU summit on Thursday and Friday.

Current EU Council President Donald Tusk had previously refused to put the issue on the agenda, but after a flurry of phone calls between Tsipras, Tusk and EU Commission President Jean-Claude Juncker, there might very well be a special meeting on the sidelines of the summit. According to Greek Radio, it would include Tsipras, French President Francois Hollande, German Chancellor Angela Merkel, ECB chief Mario Draghi and Jean-Claude Juncker.

What is not clear, however, is what exactly the Greek Prime Minister hopes to achieve at the meeting. Over the past few days, he has repeatedly referred to political solutions for the massive confidence crisis between Greece and its euro zone partners.

"Whatever contributes to objectifying and relaxing the relationship between Europe and Greece is more than welcome these days," Michael Roth a senior official in Germany's Foreign Ministry, argued. "We should talk to each other and not about each other."

German Chancellor Merkel invited Tsipras to visit Berlin on Monday in an attempt to calm the waters - these past few days have seen rising tensions and increasingly venomous verbal attacks between Greek and German politicians.

Varoufakis, Schäuble
The German and Greek finance ministers (pictured here) are not on the best of termsImage: picture-alliance

Ahead of the Brussels summit, Slovenian Prime Minister Miro Cerar warned Greece not to overdo things. "Our citizens also suffer from austerity measures and cuts," he told Bloomberg News. "We can't overstretch solidarity because our taxpayers wouldn't agree." Slovenia has also been hit by the banking and debt crisis, but, being a euro country, it participates in the EU's Greek bailout.

Serious situation

Athens and the Euro Group had agreed on February 20 to extend the bailout for Greece, while the country is scheduled to prove by the end of April that it is implementing reforms. Talks between the Greek Finance Ministry and representatives of European and international lenders - collectively known as the troika - have been stalled, the Greek Ekathimerini newspaper says. The EU Commission, the International Monetary Fund (IMF) and the European Central Bank (ECB) are puzzled at Greece's true financial status. Finance Minister Varoufakis is adamant the country will meet all its requirements, calling the liquidity problems "insignificant."

"The situation is serious," European Commission spokesman Margaritis Schinas warned, adding that it's time to work toward fulfilling last month's agreement with the Euro Group. Germany's Süddeutsche Zeitung newspaper quoted Greek media as reporting the Greek government failed to pay 200 million euros ($210 million) in EU subsidies to Greek cotton farmers, diverting the funds into the general state budget instead. The Athens government is also tapping into reserves in state pension funds in order to stay solvent.

Merkel, Tsipras
Tsipras is due in Berlin next Monday as the dispute continuesImage: picture alliance/AA

Staying afloat with treasury bills

In just a few days, the Greek government faces another debt deadline of almost two billion euros. Athens must roll over 1.6 billion euros in short-term notes, or t-bills, while the next installment of 350 million euros to the IMF is also due.

"Greece can't sell new t-bills on the market yet," Silvia Merler of the Brussels-based Bruegel research institute told DW, adding that it is limited to 15 billion euros anyway. These short-term treasury bills are mainly purchased by Greek banks, who in turn receive the money to buy the bills via the emergency liquidity assistance program (ELA) for Greek banks with the Greek central bank. That's not what the ELA program was meant for, and the ECB could actually put an end to this practice at any time.

Greece depends on the goodwill of the ECB's chief, Mario Draghi, who is said to have urged Alexis Tsipras to go over his finances and put figures on the table. Greek deputy foreign minister Euklid Tskalotos has appealed to the ECB to allow more short-term t-bills, so now, the ECB will have to decide whether or not to further extend the emergency program for Greek banks.

Payback time

Athens is also due to pay out state-backed pensions next week.

The financial experts at Bruegel assume that Greece will in fact meet its financial requirements. Tax income my have dropped significantly by about one billion euros in February, but experts at the think tank say Athens managed to offset that loss by slashing budget spending. But that won't work as a long-term strategy, warns Silvia Merler.

In the meantime, the new government is making good on some election promises, even if it means spending money.

"We will not return to the policies of austerity," Prime Minister Tsipras said in a newspaper interview. The government plans to shell out 200 million euros in food stamps and free electricity, and raise the minimum age over the coming months.

Back in Brussels, observers doubt whether these measures are consistent with the February agreement with the EU Group. The agreement stipulates that reforms - including cutting minimum wage - can't be retracted unilaterally.