Tsipras not for turning

February 9, 2015

Greek Prime Minister Tsipras delivers his first major speech in parliament in Athens

Alexis Tsipras is not for turning, not yet anyway.

Speaking in parliament on Sunday night the new Greek premier said he would not accept an extension to Greece’s current bailout, something the euro zone is urging him to do, and stuck with austerity-ending pledges such as giving free food and electricity to those who need it, reinstating civil servants who had been fired as part of bailout conditions and raising the minimum wage. Privatisations have already been halted.

Tsipras will seek a “bridge agreement” to buy time until June to buy time for a properly negotiated settlement. Instead of the last tranche of bailout funds due pending a suspended review, Greece’s new government wants the right to issue more short-term debt beyond a current 15 billion euro threshold. It also wants 1.9 billion euros in profits from Greek bonds held by the ECB and other euro zone authorities.

Having toured EU capitals last week Tsipras must surely know, regardless of what is said for domestic consumption, that his plan to renegotiate Greece’s debt pile and rip up the bailout programme will not fly given the amount of money he owes to European institutions and governments.

The latest meeting of euro zone officials pitted 18 countries against 1, according to one participant, showing the likes of Spain and Portugal are as vehemently opposed to cutting Greece a whole new deal as the northern Europeans led by Germany are.

Greece could in the end be given more time to pay off its debt if it keeps its budget in balance and maintains some level of promised reforms. But Tsipras’ commitment only to balance the budget rather than run a primary surplus to help cut its mountainous debts is a further stumbling block.

The smart money is on some sort of extension to the bailout, even if it is called something else to soothe Greek pride and eases up on some of its conditions, to allow more time for substantive negotiations. But with time short it could go horribly wrong.

Today, Tsipras will be in Vienna, continuing his tour of EU capitals.

Ukrainian President Petro Poroshenko confirmed on Sunday that he and the leaders of Russia, France and Germany would hold fresh talks in Minsk on Wednesday and said he expected them to lead to a “swift and unconditional ceasefire”. Having met Vladimir Putin in Moscow with French President Francois Hollande, Angela Merkel has flown to Washington for talks with Barack Obama.

Obama has pledged to decide soon whether to send arms to Ukraine’s military, which is under the cosh from rebel advances in the east of the country. Hawks in Washington are pressing him to do so. Merkel and most of the EU are not keen on the idea, fearing it will just pour fuel on the fire.

She conceded that it was far from certain that further negotiations would lead to a deal with Putin but argued that all opportunities for a diplomatic solution should be pursued.

Putin warned in a newspaper interview that Kiev must stop its military operation in east Ukraine and stop exerting economic pressure on rebel-held regions. It seems pretty clear he senses division. EU foreign ministers meet in Brussels with their leaders asking for new sanctions against Russia to be prepared.

The central bank world has been upended over the past month by the steepling fall in oil prices, and the effect that may have on inflation and growth, and the prospect of the ECB creating 1 trillion euros out of thin air.

That will be front and centre for finance ministers and central bankers from the Group of 20 nations who meet in Istanbul on Monday on Tuesday, as will the perennial debate about whether countries which can afford to, should spend more to generate demand.

Germany has consistently rejected that approach and last year balanced its budget for the first time in more than four decades.

Data just out showed Germany’s trade surplus widened in December as exports posted their biggest increase since September while imports fell. China’s trade performance slumped in January, with exports falling 3.3 percent year-on-year while imports tumbled 19.9 percent, highlighting deepening weakness in the Chinese economy.

A by-product of central bank divergence is that the dollar has been driven higher while stimulus from the ECB and Bank of Japan drives their currencies lower. There is no sign of angst about competitive devaluation yet, not least because the U.S. economy is growing robustly.

There will be an attempt to rationalize an unwieldy 1,000 point agenda agreed at last year’s G20 meet in Australia. Finance ministers are likely to agree to cut the number of actions they will take this year to boost growth to only 5-10 priorities per country to make it easier to check progress.

Hollande’s ruling Socialists won a parliamentary by-election in eastern France on Sunday, narrowly beating the National Front after the conservative UMP was eliminated in a first round. Hollande has seen his popularity ratings double from record lows in the wake of last month’s Islamist attacks in Paris.

Nigeria’s electoral commission postponed Feb. 14 elections to March 28 after security chiefs said they could not guarantee security owing to operations to combat Boko Haram. The decision was widely viewed as yielding to pressure by President Goodluck Jonathan’s ruling party, which the opposition said feared it could lose.

No comments so far

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/