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Greece’s new Finance Minister Yanis Varoufakis says his government will not negotiate over the Greek bailout conditions with the “troika” team from the EU and IMF.
Yanis Varoufakis said he was rather seeking direct talks with eurozone leaders, to try to cancel more than half the money Greece owes.
The minister was speaking after meeting Jeroen Dijsselbloem, head of the Eurogroup – the eurozone finance ministers.
Jeroen Dijsselbloem said Greece should stick to its reform commitments.
He said Greece and the Eurogroup had a “mutual interest in the further recovery of the Greek economy inside the eurozone” and warned against Athens acting unilaterally in its efforts to renegotiate its bailout.
Greece has endured tough budget cuts in return for its €240 billion ($270 billion) bailout, agreed in 2010 with the “troika” – the European Commission, International Monetary Fund (IMF) and European Central Bank (ECB).
There was little warmth between the two men at the news conference, with Jeroen Dijsselbloem making a brusque exit.
Breaking with tradition, Yanis Varoufakis wore an open-neck shirt – hanging loose at his belt. Jeroen Dijsselbloem was dressed conventionally.
On the troika, Yanis Varoufakis said: “We have no intention of co-operating with a three-member committee whose goal is to implement a program whose logic we consider anti-European.”
Jeroen Dijsselbloem, who is also Dutch Finance Minister, said the two sides would decide what would happen next before the bailout program ends – that is, by February 28.
He also met Greek PM Alexis Tsipras in Athens, who led the Syriza radical left-wing coalition to victory in elections on Sunday.
Yanis Varoufakis, meanwhile, said Greece was not asking for an extension of the existing bailout, but seeking a “new agreement that will emerge following talks between all Europeans”.
He said he would he seek “maximum co-operation” with Greece’s international creditors, but that he would not work through the “troika”, which he called “a committee built on rotten foundations”.
Jeroen Dijsselbloem rejected Alexis Tsipras’s idea of convening a European conference on debt.
“This conference already exists and it’s called the Eurogroup,” he told the news conference.
Syriza won on an anti-austerity platform, promising to have half of Greece’s debt written off, and to roll back on deep cuts to jobs, pay and pensions.
Greece’s economy has shrunk drastically since the 2008 global financial crisis, and high unemployment has thrown many Greeks into poverty.
The new government has already pressed ahead with cancelling major privatization projects, including of the two main ports of Piraeus and Thessaloniki.
But EU officials have warned there is little appetite among eurozone countries for cutting the debt.
Greece has about €20 billion ($22.5 billion) to repay this year, according to the Greek finance ministry.
Economists estimate that Greece needs to raise about €4.3 billion in the first quarter.
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Cyprus has received the first installment of a 10 billion-euro bailout package from international creditors, which was agreed earlier this year.
Cyprus received 2 billion euros ($2.6 billion) in loans, said a statement by the European Stability Mechanism (ESM).
Another 1 billion euros will be transferred before June 30, the ESM said.
Eurozone finance ministers are also expected to sign off the latest tranche of Greece’s bailout, as it continues to struggle to reform its economy.
Another topic on the agenda at their meeting in Brussels is Slovenia, which is seen as potentially likely to follow Greece and Cyprus in seeking help from European authorities.
Concerns are growing despite a plan unveiled last week by Slovenia’s government, aimed at avoiding a bailout.
The government plans to restructure the country’s stricken banking system, raise taxes and privatize swathes of state-owned companies.
Meanwhile, Greece is expected to receive as much as 7.5 billion euros in the latest payment of its massive 240 billion-euro bailout, first agreed in 2010.
It needs the money to pay wages, pensions and bondholders.
Cyprus has received the first installment of a 10 billion-euro bailout package from international creditors
Earlier this month, the International Monetary Fund (IMF), one of the “troika” of international lenders behind the bailout, said Greece had made “progress” in tackling its budget deficit over the last three years.
But it also said structural reforms to the economy had been “insufficient” and problems of tax evasion had not been addressed.
Further austerity measures have been a condition of Greece receiving the latest installments of its bailout.
In a separate development, Germany’s finance minister has warned again that a single EU bank rescue authority backed by a bailout fund was not viable without overhauling EU treaties.
Existing EU treaties “do not suffice to anchor beyond doubt a new and strong central resolution authority,” Wolfgang Schaeuble wrote in the Financial Times on Monday.
European officials have called for a strong central authority, backed by a European rescue fund, to decide on what to do with failing banks.
This, they say, is key to establishing a “banking union” that would, in theory, stabilize the financial system in the region.
But Wolfgang Schaeuble said that promises to create an authority quickly without changing treaties would cost the EU credibility.
“We should not make promises we cannot keep,” he said.
“Amending the treaties takes time.”
Instead, he proposed that national agencies should co-operate with each other to oversee bank rescues.
This would result in a “timber-framed, not a steel-framed, banking union”, but it would buy time until treaty changes are made.
The European Commission, the EU’s executive arm, is working on a proposal for a mechanism to deal with failing banks, which it plans to unveil next month.
Cyprus banks are to reopen on Thursday at 12:00 p.m. local time, two weeks after they closed to prevent a bank run as a controversial bailout was negotiated.
Banks will open their doors between 12:00 and 18:00 local time, the Cypriot central bank said.
Customers will also be limited to withdrawing 300 euros ($383) a day, to prevent everyone fleeing with their savings.
“I am telling you that all banks are definitely going to open tomorrow,” the Cypriot central bank’s Aliki Stylianou said, which comes after several false announcements of when bank customers will be able to access their funds.
Capital controls are to be imposed as Cyprus seeks to raise 5.8 billion euros to qualify for a 10 billion-euro bailout from the EU, ECB and the IMF, the so-called troika.
Cyprus banks are to reopen on Thursday at noon, two weeks after they closed to prevent a bank run as a controversial bailout was negotiated
Cyprus Finance Minister Michalis Sarris announced a long-awaited series of capital controls, including the 300-euro daily withdrawal, and no cheques can be cashed.
Michalis Sarris cited the “lack of substantial liquidity and significant risk of deposits outflow, with possible outcome the collapse of the credit institutions” as the reasons for the restrictions.
Depositors in Cypriot banks with more than 100,000 euros could see 40% of their funds converted into bank shares, while those with less than 100,000 euros will not lose any funds – but face limits on what funds they can access.
Speaking to the Financial Times, Michalis Sarris said that the controls would be reviewed after seven days, and that some banks could be exempted altogether.
Other controls will prohibit people from taking more than 1,000 euros in cash outside the island, with customs officers authorized to make checks at border crossings.
Money transfers outside Cyprus are prohibited, with a few very specific exceptions, and there is a limit of 5,000 euros a month in credit or debit card purchases while abroad.
The new measures mean that Cyprus is the first eurozone nation to impose capital controls – the absence of which is a fundamental reason behind the monetary union of the 17 members of the euro bloc – since the debt crisis began.
Concern about the ongoing situation in Cyprus has continued to weigh on the Athens stock market, with Greek shares ending down 4% on Wednesday.
Bank of Cyprus chief executive Yiannis Kypri confirmed he had been removed as head of the bank, which is the country’s largest commercial lender.
Reuters reported that Yiannis Kypri had issued a statement about his removal, which said: “The reason I was given was that, based on the resolution decree recently passed by parliament, and upon demands of the troika, an administrator had been appointed at the Bank.
“Until now I have not received a formal letter from the governor of the Central Bank on the matter.”
A European Commission spokesman denied that the troika had demanded Yiannis Kypri’s removal.
“These reports are not correct and decisions like this would in any case be the responsibility of the Bank of Cyprus,” he said.
An administrator has been appointed to Bank of Cyprus to restructure the bank. It is being merged with the “good” parts of the failed Laiki Bank, which will be closed down.
Bank of Cyprus chairman Andreas Artemis handed in his resignation on Tuesday, along with four other directors, but the bank’s board rejected the resignations.
Now Panicos Demetriades, the central bank governor, has sacked the entire board, according to the Cyprus News Agency.
Panicos Demetriades was widely criticized on Tuesday for suggesting that Bank of Cyprus was going to be wound up in the same way as is planned for Laiki Bank.
His comments led to demonstrations, calls for his resignation from Bank of Cyprus staff, and a hastily-drafted denial from Finance Minister Michalis Sarris.
Panicos Demetriades said “superhuman” efforts were being made to get the banks ready for reopening on Thursday.
“Indications are that banks will open tomorrow with some restrictions on capital,” said central bank spokeswoman Aliki Sylianou, speaking to the country’s state broadcaster on Wednesday.
The banks have been shut since March 15 while the controversial 10 billion-euro bailout was being negotiated.
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Cyprus’ Finance Minister Michael Sarris has announced the country has made “significant progress” in talks with the EU and IMF aimed at securing a bailout.
Michael Sarris was also quoted as saying Cyprus was considering a 25% levy on deposits of more than 100,000 euros in its biggest bank.
Cyprus has to raise 5.8 billion euros ($7.5 billion) before Monday to secure a 10 billion-euro loan.
Parliament has approved restructuring the island’s banks, among other moves.
But it rejected a levy earlier this week, before EU pressure brought the proposal back to the table. The rejected proposal included a levy on smaller deposits.
On Saturday afternoon more than 1,000 bank employees marched to the Cypriot finance ministry, stopping briefly at the presidential palace on the way.
Marchers held placards with slogans such as “No to the bankruptcy of Cyprus” and chanted “United we cannot be defeated”.
Michael Sarris was speaking after talks with the “troika” of the EU, the European Central Bank (ECB) and the IMF.
“Significant progress has been made toward an agreement at least with the troika which will report to the Eurogroup,” he said.
“Two or three issues need further work.”
Cyprus has made significant progress in talks with the EU and IMF aimed at securing a bailout
Michael Sarris said experts were now discussing these issues, and the talks would resume later on Saturday afternoon with the aim of finalizing the package.
Cyprus’ President Nicos Anastasiades and party leaders were considering a trip to Brussels depending on the outcome of the meeting.
The Eurogroup, of 17 eurozone finance ministers, will meet to discuss the Cyprus bailout at 18:00 local time on Sunday, its president Jeroen Dijsselbloem tweeted.
The ECB has given Cyprus until Monday to raise the bailout money.
If Cyprus fails, the ECB said it would cut off funds to the banks, meaning they would collapse, possibly pushing the country out of the eurozone.
Cyprus now needs to find out what money-raising measures the EU will accept before putting them to a vote.
Germany is essentially writing the rules for the eurozone, and the message coming from Brussels and Berlin is that the money has to come from the banking sector and investors who have benefited from high interest rates over recent years.
Germany has voiced opposition to another measure approved by the Cypriot parliament on Friday – nationalizing some pensions to pay into a solidarity fund along with other assets.
Germany has also made it clear that it will no longer accept an economy within the eurozone that is dominated by its status as an economic tax haven, our correspondent adds.
Leading Cypriot bankers have urged parliament to accept a levy, with small savers exempted.
On Tuesday, parliament overwhelmingly rejected a levy that would have made small savers pay 6.75%, while larger investors would have paid 9.9%.
The proposal had provoked widespread anger among both ordinary savers and large-scale foreign investors, many of them Russian.
The government fears a levy would prompt foreign investors to withdraw their money, destroying one of the island’s biggest industries.
Michael Sarris travelled to Moscow this week to seek Russian support for alternative funding methods, but Russia said it would only act after the EU reached a deal with Cyprus.
Among nine bills approved on Friday, Cyprus MPs voted to restructure the banking sector, starting with the second-largest and most troubled lender, Laiki (Popular) Bank.
Under the restructuring, troubled lenders will be split into so-called good and bad banks, protecting smaller deposits but allowing levies on bigger ones.
There is now speculation that the biggest lender, the Bank of Cyprus, will also be restructured.
Parliament also voted for capital controls to prevent large withdrawals from Cyprus.
Banks in Cyprus have been closed since Monday and many businesses are only taking payment in cash.
Anthanasios Orphanides, former governor of the Cyprus Central Bank, said Cyprus was a victim of German domestic political pressures ahead of a general election there later this year.
German Chancellor Angela Merkel and her party needed to avoid being accused of using “German taxpayers’ money to pay off Russian oligarchs”.
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Hundreds of thousands of people have taken part in protests across Portugal against government austerity measures.
Huge crowds gathered in the capital Lisbon to demand the government resign.
Many carried placards condemning the “Troika” of the IMF, the European Commission and the European Central Bank, which demanded budget cuts in return for a financial bailout.
The conservative government has introduced steep tax rises as it tries to reduce a huge budget deficit.
Unemployment is at a record 17.6% and the economy is expected to contract by 2% this year – the third straight year of recession.
The demonstrations organized on social media also have the backing of Portugal’s main trade union federation.
On Saturday, organizers said as many as 500,000 protested in Lisbon, and hundreds of thousands more in other towns and cities.
The rallies coincide with a visit by inspectors from the EU and the IMF, which demanded austerity measures as a condition for a 78 billion-euro bailout in 2011.
Hundreds of thousands of people have taken part in protests across Portugal against government austerity measures
Protesters carried banners with slogans such as “Austerity Kills” and “Screw the Troika”.
They also chanted a popular song “Grandola” associated with the 1974 “Carnation Revolution” that brought an end to dictatorship.
“This government has left the people on bread and water, selling off state assets for peanuts to pay back debts that were contracted by corrupt politicians to benefit bankers,” film director Fabio Carvalho, who was among the protesters in Lisbon, was quoted as saying by Reuters.
“If not today, things have to change tomorrow and we need to remain in the streets for the government to fall.”
The demonstrators are demanding a complete change of course from the government, but it says further spending cuts are necessary to revive the economy.
This year’s budget was Portugal’s toughest in living memory, imposing tax rises that for many workers amount to a month’s wages.
But the gloomy economic outlook means it will almost certainly have to find more saving.
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French President Francois Hollande has urged Greece to prove it can pass reforms demanded by international creditors, after talks with PM Antonis Samaras.
Greek PM Antonis Samaras has been appealing for more time to introduce the reforms.
But Francois Hollande said no further decision could be taken until European ministers consider a major report on Greece’s finances, due in September.
Donors including the EU insist Greece has to make major spending cuts.
These are needed if Greece is to secure the next tranche of its bailout.
French President Francois Hollande has urged Greece to prove it can pass reforms demanded by international creditors, after talks with PM Antonis Samaras
The Greek government is under pressure to win concessions from Europe to placate the tired nation and lessen the likelihood of a destabilizing period of social unrest.
Antonis Samaras is seeking an extension of up to two years for the necessary reforms, in order to provide Greece with the growth needed to improve its public finances.
In talks with German Chancellor Angela Merkel earlier this week, he was told that the decision would depend on a report from the so-called troika – the International Monetary Fund (IMF), the European Central Bank (ECB) and the European Commission.
Francois Hollande also said Europe needed to consider the report before it could make any further decisions on Greece.
He said decisions on whether to grant Greece more time should be taken when European finance ministers meet in early October.
“We’ve been facing this question for two and a half years, there’s no time to lose, there are commitments to reaffirm on both sides, decisions to take, and the sooner the better,” he said.
Greece’s continued access to the bailout packages depends on a favorable report from the troika.
Athens is trying to finalize a package of 11.5 billion euros ($14.4 billion) of spending cuts over the next two years.
It is also being asked to put in place economic and structural reforms, including changes to the labor market and a renewed privatization drive.
The measures are needed to qualify for the next 33.5 billion-euro installment of its second 130bn-euro bailout.
Greece needs the funds to make repayments on its debt burden. A default could result in the country leaving the euro.
Greece’s Prime Minister Antonis Samaras is expected to repeat his plea for more time to implement reforms when he meets French President Francois Hollande.
The talks in Paris come a day after Antonis Samaras asked for his country to be given “breathing space” during talks with German Chancellor Angela Merkel.
Angela Merkel said she wanted Athens to remain in the eurozone but expected it to stick to the tough bailout terms.
The French leader is now likely to echo that message, correspondents say.
Angela Merkel and Francois Hollande met on Thursday to discuss Greece and urged Athens to stick with the tough reforms.
Greece’s Prime Minister Antonis Samaras is expected to repeat his plea for more time to implement reforms when he meets French President Francois Hollande
On Greece, the two leaders seem to be on the same page.
In Paris, Antonis Samaras is expected to call for more time to reduce the deficit, given the worse-than-expected recession and months lost this year due to elections, our correspondent says.
He adds that the Greek government is under pressure to win a concession from Europe so as to placate this tired nation and lessen the likelihood of a destabilizing period of social unrest.
After Friday’s talks with Angela Merkel in Berlin, Antonis Samaras said: “Greece will stick to its commitments and fulfill its obligations. In fact, this is already happening.
“We’re not asking for more money,” he said, adding that Greece needed “time to breathe”.
The International Monetary Fund (IMF), the European Central Bank (ECB) and the European Commission – the group of donor bodies known collectively as the “troika” – are examining whether Greece is making sufficient progress towards reforming its public finances.
Greece’s continued access to the bailout packages depends on a favorable report from the trio, and an official report is due to be released next month.
Greece is currently trying to finalize a package of 11.5 billion euros ($14.4 billion) of spending cuts over the next two years.
It is also being asked to put in place economic and structural reforms, including changes to the labor market and a renewed privatization drive.
The measures are needed to qualify for the next 33.5 billion-euro installment of its second 130 billion-euro bailout.
Greece needs the funds to make repayments on its debt burden. A default could result in the country leaving the euro.
Antonis Samaras is seeking an extension of up to two years for the necessary reforms, in order to provide Greece with the growth needed to improve its public finances.
Moody’s has warned the outlook for Germany’s AAA credit rating is negative, the first step towards a possible downgrade.
Credit ratings agency Moody’s said the country was at risk from the increased likelihood of a Greek exit from the euro and the need to provide more support to Spain.
Concerns are growing that Spain will have to seek a full bailout.
The Netherlands and Luxembourg – both AAA rated economies – were also put on negative watch.
A negative outlook posting from Moody’s, one of a handful of agencies that assess the creditworthiness of borrowers, reflects a higher risk that the actual rating will be cut at some point in the next two years.
France and Austria lost their AAA ratings earlier this year.
Moody’s said there was an increased chance that Greece could leave the eurozone, which “would set off a chain of financial sector shocks”.
It added that policymakers could only contain these shocks at a very high cost.
Representatives from the troika of international lenders are due to arrive in Greece later to assess its progress towards reducing its debts.
They must decide whether Greece is eligible to receive 31.5 billion Euros – the last tranche of a 130 billion euro ($158 billion) aid package agreed in March.
Greece is behind in its plans to cut spending and debt because its economy is shrinking faster than forecast.
Moody's has warned the outlook for Germany's AAA credit rating is negative, the first step towards a possible downgrade
Separately, the German finance minister, Wolfgang Schaeuble, is to meet the Spanish Economy Minister, Luis de Guindos, in Berlin.
The meeting comes a day after Spain’s borrowing costs rose to their highest level since the creation of the euro. Yields on the country’s 10-year bonds remained above 7.5% on Tuesday.
Italy’s 10-year bond yield was also stuck at a high level, with a yield of 6.377%.
Moody’s warned that Germany and other highly-rated countries may have to increase levels of support for countries such as Spain and Italy, who have not asked for a Greek-style bailout but who are struggling with high debt levels.
It said in a statement: “Even if such an event [a Greek exit] is avoided, there is an increasing likelihood that greater collective support for other euro area sovereigns, most notably Spain and Italy, will be required.
“This burden will likely fall most heavily on more highly rated member states if the euro area is to be preserved in its current form.”
Jim O Neill, the chairman of Goldman Sachs asset management, said the European Central Bank needed to take radical action.
“If Italy gets into already the kind of pressure that we now see on Spain, there would be contagion into the French markets probably… so the policy makers have got to do something a little bit more decisive in terms of monetary interventions,” he said.
Lena Komileva, the chief economist at the investment research company, Gplus Economics, said she too was worried about problems escalating.
“My concern is that an outright sovereign bailout is such a politically unpopular measure that it might just happen too late, which means that Spain will continue to bleed contagion into the rest of the eurozone for the remaining of the year.
“Italy of course is an open target for contagion, but I’m increasingly concerned about the position of France.”
The downgrades come as worries over the eurozone crisis pushed the yields on Spanish and Italian debt to record euro-era highs, reflecting a weakening of faith in the pair’s financial position.
The German Finance Ministry said the country would remain strong, and said that Moody’s was focusing on short-term risks.
“By means of its solid economic and financial policy, Germany will retain its <<safe haven>> status and continue to play its role as the anchor in the euro zone responsibly,” the ministry said.
Rival agencies, including Standard & Poor’s and Fitch, have Germany on the AAA top rating with a stable outlook, implying they do not currently foresee a weakening of its financial position, although all agencies regularly review their rankings.
Representatives from the troika of international lenders arrive in Greece on Tuesday to assess its progress towards reducing its huge debts.
They must decide whether Greece is eligible to receive 31.5 billion Euros – the last tranche of a 130 billion Euro ($158 billion) aid package agreed in March.
Athens is behind in its plans to cut spending and debt because its economy is shrinking faster than forecast.
The Greek prime minister is expected to ask for more time to repay its loans.
The International Monetary Fund (IMF), European Central Bank (ECB) and European Commission (EC) make up the troika.
The IMF said it was “supporting Greece in overcoming its economic difficulties” and would work with the country to get it “back on track”.
However, reports over the weekend suggested that the IMF would refuse calls for further aid.
Representatives from the troika of international lenders arrive in Greece on Tuesday to assess its progress towards reducing its huge debts
Greece has promised to reduce its budget deficit to below 3% of annual national income as measured in Gross Domestic Product (GDP) by the end of 2014. At the end of last year, Greece’s overspend was equivalent to 9% of GDP in 2011.
Successive Greek governments have managed to trim 17bn euros from government spending. That has brought the country’s total debt down from more than 160% of GDP to 132% according to official figures released on Monday.
Under the terms of its international loan agreement with the troika, Greece has vowed to reduce its total debt to 120% of GDP by 2020.
However, Prime Minister Antonis Samaras would have had to have raised another 12 billion Euros through higher taxes and the sale of public assets such as the country’s loss-making railways to have met this bailout target.
Still worse, Greece’s economy is shrinking faster than most had forecast. The Bank of Greece expects GDP to shrink 5% this year in its deepest recession since the 1930s.
As a result, economists calculate that Greece may need a third rescue package worth up to 50 billion Euros.
The re-run of general elections and political instability as parties scrambled to form a governing coalition has delayed work by the troika and the government to agree a credible plan to restore the nation’s finances.
A European Commission spokesman said the troika would not be in a position to report its findings and release the final 31.5 billion euro installment of bailout money until September.
“The Commission is confident that the decision on the next disbursement will be taken in the near future, although it is unlikely to happen before September,” he said.
That leaves Greece in a difficult situation. A 3.8 billion euro debt repayment to the ECB falls due on 20 August. Without the troika money, the ECB may be forced to step in to provide temporary aid.
But further debt repayments are due in September so failure to secure the bailout money could push Greece to the brink of insolvency.
If Greece were to default on its outstanding loans that, in turn, could force it to exit the eurozone and return to the drachma.
*Troika
The term used to refer to the European Union, the European Central Bank and the International Monetary Fund – the three organizations charged with monitoring Greece’s progress in carrying out austerity measures as a condition of bailout loans provided to it by the IMF and by other European governments. The bailout loans are being released in a number of tranches of cash, each of which must be approved by the troika’s inspectors.
