Pessimism Surrounds Greece Bailout Talks as Monday’s Eurogroup Meeting Draws to a Close
Greece and EU finance ministers descended upon Brussels on Monday to resume talks about the future of Athens’ bailout program. However, finance ministers are not optimistic that an early deal could be reached, setting the stage for a bigger confrontation between Greece and its troika of lenders, one that could eventually see the Hellenic republic exit the currency union.
“What I have heard so far has not strengthened my optimism. It seems like we have no results so far,” said German finance minister Wolfgang Schaeuble as he arrived in Brussels. “I’m quite skeptical, The Greek government has not moved, apparently.”
Talks between Greek and EU finance ministers broke down last week, with both sides remaining far apart on the future of Greece’s bailout conditions. The newly elected government of Alexis Tsipras has taken a combative stance regarding the current bailout program. Athens is demanding large scale reforms on the current agreement, including a bridging loan to keep the government financed for six months and a reduction in the primary surplus target from 3 percent to 1.49 percent of gross domestic product.
The current bailout program is set to expire on February 28. A failure to reach an agreement in the interim could raise the likelihood of a Greece exit from the 19-nation currency bloc. According to Morgan Stanley, the likelihood of that happening is 20 percent. The multinational investment bank said there is a greater likelihood (55 percent) that the Greek government fails in its negotiations and upholds the current program.
Greece’s exit from the Eurozone could spell disaster for the currency union and lead to its disintegration. According to several analysts, this would be the worst option for all parties involved, raising optimism both sides are willing to compromise in the days and weeks ahead. According to recent polls, more than three-quarters of Greeks supported Syriza’s hardline stance and 74 percent believed the government would succeed in negotiating a new plan.
Greece’s far-left government was elected in January, securing 149 out of 300 seats. The party campaigned on a popular platform of “anti-austerity,” promising to raise the standard of living and renegotiate a new debt repayment plan.
Monday’s negotiations did not yield any results, according to a Greek government official. Greece reportedly rejected the European Union’s initial bailout offer, calling it “absurd” and “unacceptable.”
The failure to make any ground in negotiations resulted in a sharp selloff for the euro. The EURUSD tumbled 0.53 percent to 1.1336. The US markets were closed on Monday for President’s Day.
The euro has declined more than 6 percent against the US dollar this year, as a faltering Eurozone economy prompted a fresh wave of stimulus by the European Central Bank. The ECB last month announced a program to purchase €60 billion a month in assets. The initial phase of the program, also known as quantitative easing, is expected to last until September 2016. The ECB will flood the euro area with more than €1 trillion in newly created money over that period in an attempt to reverse deflation and kick start growth.
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