World Economy

Greece Back on Collision Course With EU

Greece Back on Collision Course With EUGreece Back on Collision Course With EU

 Greece’s new government put itself back on a collision course with the European Union on Friday by demanding temporary funding before renegotiating its foreign loans, prompting fresh warnings of a default.

Five days before an extraordinary meeting of eurozone ministers in Brussels, Athens announced it wanted to negotiate “without pressure and blackmail”, EUbusiness reported.

The news came after a week of intense discussions between the hard-left government and EU leaders, in which Athens clashed with Germany over its promises to end austerity and cut Greece’s huge mountain of debt.

With the European portion of Greece’s 240-billion-euro ($275b) EU-IMF bailout due to expire at the end of the month, investors are increasingly concerned it could default.

Credit rating agency Standard and Poor’s late Friday downgraded Greece to just one notch above the range indicating vulnerability to a default, and warned of the renewed prospect of a Greek exit from the eurozone.


S&P warned against any further delay in bailout negotiations, saying that in the worst-case scenario it could result in Greece’s exclusion from the single currency.

Greece is entitled to another 7.2 billion euros in loans under the bailout plan, money it desperately needs to keep afloat.

But the new government says it does not want it, and prefers instead to rip up the program and start again.

If Greece will not accept the funds and cannot reach agreement on new terms, its European partners want it to extend the program -- something Athens says it will not do.

A government source said Friday that it wants 1.9 billion ($2.2b) in profits made by the European Central Bank from holding Greek government bonds, and permission to issue additional short-term debt.

  No Bridging Loans

Hours earlier to the talks, the head of the eurozone group of finance ministers, the so-called Eurogroup, had already dismissed the notion of temporary funding demanded by Greece.

“We don’t do bridging loans,” Jeroen Dijsselbloem told reporters in The Hague, according to Bloomberg.

The Eurogroup is holding a special meeting next Wednesday, the day before EU leaders meet for their regular summit, to discuss the escalating stand-off over Greece. Germany, which is opposed to any debt relief or an easing of the austerity measures demanded of the bailout loans, said it expected Athens to set out its plans at the meeting.

“Before then, we expect the Greek government will make a proposal on how things should move forward,” German foreign ministry spokesman Martin Jaeger said.

A Greek government source earlier said the meeting was no surprise and was a “welcome” chance to discuss its plans.

Spokesman Gabriel Sakellaridis told Vima Radio that it was in no sense an ultimatum, adding: “The sooner a solution is found, the better for the government and for the EU.”

More details on Greece’s plans may emerge when the government unveils its legislative program on Sunday evening.