World Economy

Risk of Grexit Higher

Risk of Grexit HigherRisk of Grexit Higher

Talks between Greece and eurozone finance ministers over the country's debt have broken down. Athens rejected a proposal to request a six-month extension of its international bailout as ''unacceptable''.

No-one was expecting an early breakthrough. But the collapse of talks in Brussels with eurozone finance ministers so soon after they started disappointed even the more pessimistic, Reuters reported Tuesday.

The EU had proposed extending its international bailout program by six months, keeping the same conditions. Eurogroup Chairman Jeroen Dijsselbloem said, "The euro group ministers were unanimous on this point. It really is up to the Greek government now to decide whether they want an extension to the program. Within that program, a lot of changes are possible, there is flexibility but the main features of the program, keeping the budget on track, reforming the economy have to be maintained."

Greece was having none of it. Finance Minister Yanis Varoufakis said: "We want an honorable settlement. We want to wed together these principals – the principal that there is a program that has to be accepted and the principal that there is a government that challenges the logic of this program and let's find common ground between the two. It is Plan A. There is no Plan B."

In Athens crowds gathered outside parliament in support of their new government. A new poll says four out of five Greeks want to stay in the euro. But the anti-austerity stance is popular too – and one in three people want Greece’s leaders to stand tough even if it means a return to the drachma. That’s now looking more likely.

  Tough Line

Germany was maintaining a tough line throughout the talks. German Finance Minister Wolfgang Schaeuble bluntly said that Greece had lived beyond its means for too long and that Europe could not keep handing over cash without guarantees from the Greeks, RT reported.

Yanis said earlier that he was sick of being treated as a “debt colony” and being subjected to “the greatest austerity” for an economy which has been reeling from crisis to crisis.

The Eurogroup head said there was still time for Greece to agree an extension. Dijsselbloem told journalists that another meeting was possible this Friday, but said that it was “up to the Greeks”.

In order to replace the bailout, which was agreed on three years ago, Greece wants a “bridging agreement” worth 21 billion euros, which would allow the new government time to implement radical economic reforms.

  Treasury Bills

Greece is also asking the eurozone to give it treasury bills guaranteed by the European Central Bank (ECB) as well as requesting the freeing up of bonds currently used as bank guarantees in the Hellenic Financial Stability Fund to be used for public financing.

So far Greece’s eurozone creditors have shown little appetite to give Athens so much as an inch on the austerity measures that have been demanded in return for a massive 240 billion euro loan to stave off bankruptcy.

It was not at all clear late Monday when the Eurogroup would meet next to negotiate and reach a deal with the Greeks.

France however, has showed signs that it will push for a compromise.

As long as Greece remains at the negotiating table the ECB has provided emergency funding worth 65 billion euros, but unless a compromise can be found, Greece will lose the emergency assistance at the end of the month, which would result in certain financial collapse and the country being unable to pay its debts. This in turn would leave Greece with no choice but to leave the eurozone.

 EU Nervous

Greece only has a few days to either agree to an extended EU bailout, or walk away from its European partners and seek other assistance, possibly Russia or China, or other BRICS countries.

The EU is nervous about Greece looking elsewhere to get a better deal, according to former British diplomat William Mallinson.

“They fear above all Greece getting closer to Russia, as it ought to historically in any case. Because at the end of the day, they know very well that it is possible to have a BRICS loan with perhaps Russian-Chinese help, with far lower interest rates,” Mallinson told RT.

Greece’s Prime Minister Alexis Tsipras has been invited to China by Chinese Prime Minister Li Keqiang for a state visit.