Five years ago to the day, European leaders met to talk about a Greek debt crisis. They’re at it again this week, with Athens pressing hard for a new deal.
Greece’s new government, led by left-wing party Syriza, says half a decade of austerity has condemned the country to a downward spiral that is impoverishing its people and making it impossible to repay its enormous debts.
It wants to tear up the existing bailout program and win six months of breathing space to agree a longer term solution.
Greece has its first formal opportunity to explain its thinking at an emergency meeting of eurozone finance officials in Brussels Wednesday.
Greece wants to roll back 30% of the commitments it has made to the European states that have lent it money. It wants to reduce its government debt burden, which at 175% of GDP is the second highest in the world, raise the minimum wage and pensions, and reverse some tax hikes.
But the two sides are far apart, and there’s little prospect of a deal this week.
Europe says Greece must honor the terms of the existing rescue loans, before it can talk about ways to ease the burden and boost growth.
The impasse threatens to cut off the lifeline keeping Greek banks afloat later this month, and could ultimately force Greece to abandon the euro. Analysts say the chances of a ‘Grexit’ are higher than at any point since the second round of the Greek debt crisis in 2012.
With other countries such as Ireland, Portugal and Spain having worked through their own painful bailout programs, Europe is in better shape than a few years ago to cope with such a shock. And less inclined to give Greece much ground.
“For a number of eurozone government[s] …it’s important that Syriza should fail and be seen to fail,” said Andrew Lilico, executive director of consultancy Europe Economics. “The last thing, if you are the Spanish government, you would want to see is an endorsement that the policies pursued by their political enemies internally can be vindicated by success.”
The leaders of the 19 countries that share the euro will discuss a way forward Thursday, before finance officials meet again Monday. They’re likely to need all that time and maybe more, if they’re to find a compromise that is acceptable to Greece and to taxpayers in countries such as Germany and France.
“There is a need for a lot of goodwill for this first conversation,” the European Commission’s finance chief Pierre Moscovici said on arrival at Wednesday’s meeting.
Europe needed to recognize that Greeks had voted for change, while Greece had to understand that commitments must be respected.
“The [bailout] program is our legal reference, it is on this basis — inside this framework — we can work,” he said.
Greece’s biggest creditor, Germany, reinforced that view.
“We have this program, this program will be brought to an orderly conclusion or we won’t have a program,” finance minister Wolfgang Schaeuble said bluntly.
Greek Prime Minister Alexis Tsipras repeated Tuesday night that he would not ask for a formal extension of the bailout, which is due to expire on February 28.
Without an extension, the European Central Bank could decide as early as next week to turn off emergency financing for Greek banks.
— CNN’s Nina dos Santos contributed to this article.