Greece back on collision course with EU over loan demands| MENAFN.COM

Tuesday, 09 August 2022 05:30 GMT

Greece back on collision course with EU over loan demands

(MENAFN- AFP) 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".

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 ($275-billion) 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 radical new government says it does not want it, and prefers instead to rip up the programme 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 programme -- something Athens says it will not do.

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

"The bridge programme... is an official expression of the will of all sides to negotiate without pressure and blackmail," the source said, referring to the temporary funding deal.

The source added: "The final Greek proposals... will be tabled after the bridge agreement."

- No bridging loans -

Hours earlier 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 programme on Sunday evening.

- 'Keeping campaign promises' -

Greek Prime Minister Alexis Tsipras and Finance Minister Yanis Varoufakis visited Paris, London, Rome, Frankfurt, Brussels and Berlin this week to try to win over EU allies, but once again came up against Germany intransigence.

Italian Finance Minister Pier Carlo Padoan stressed Friday that the goal next week was not to set up a confrontation with Greece but to "look for shared solutions".

"We need to find a solution that puts Greece back on a path to sustainable economic growth and is compatible with its financial commitments," he said, according to Italian news agencies.

Addressing the first meeting of his Syriza party lawmakers in parliament Thursday, Tsipras insisted his government would keep its campaign promises to end austerity.

"We are a sovereign country, we have democracy, we have a contract with our people, we will honour this agreement," he said.

In a remarkable show of support for the government, thousands of people gathered outside parliament that evening, standing silently in Syntagma Square.

The Greek stock market closed 1.97 percent down at 803 points on Friday, after a volatile day Thursday sparked by the ECB's shock move to cut off a source of funds for Greek banks.

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