Greek charm offensive falls flat in Berlin
A whistle-stop tour of European capitals netted Greek Finance Minister Yanis Varoufakis few, if any, concessions over Greece's debt, but the prevailing view in markets is that his anti-austerity government will reach agreement with its creditors in the coming weeks.
Barely 10 days after left-wing Syriza was swept to power in Athens, analysts expect a compromise over Greece's debts to emerge, allowing it to remain a member of the 19-country Eurozone.
Varoufakis' breathless dash across Europe, which in less than a week took him to Paris, London, Rome and Frankfurt, came to an end with his visit Thursday to Berlin, where he met with his counterpart, Wolfgang Schaeuble.
Despite his charm offensive, Varoufakis isn't returning home to Athens with anything tangible. And following a decision late Wednesday by the European Central Bank to stop lending to Greek banks using the nation's junk-rated government bonds as collateral, the financial backdrop may in fact be slightly more precarious.
Though no one expected Varoufakis to talk Schaeuble into a wholesale overhaul of Greece's debt and austerity programme, there were few signs that the two were positioned for a breakthrough any time soon. Schaeuble said he and Varoufakis "agreed to disagree" at their meeting in the German capital, and that a writedown, or haircut of Greece's debt, wasn't on the negotiating table.
"Greece belongs to the euro," Schaeuble said. "But we don't really agree on what we have to do now despite a very intense, open discussion."
Gary Jenkins, chief credit strategist at LNG Capital, said an eventual compromise is still the most likely outcome, although he did warn of a so-called 'Grexit' by accident.
"In order to avoid a default and an exit from the Eurozone, the Greek politicians will have to moderate their position," he said.
Germany will be key on how discussions pan out over the coming weeks, including at next week's summit of European Union leaders in Brussels.
Germany's views matter as it is the biggest European contributor to Greece's five-year bailout programme. It is a staunch proponent of the strict fiscal discipline that Greece has to impose in return for the rescue money that has prevented it going bankrupt.
Varoufakis - who went out of his way to praise the veteran Schaeuble as "a European statesman for whom European unity is a lifelong project" - insisted that it's not Athens' intention to default on its debts and that it wants to carve out a new compromise deal that will be to the mutual benefit of Germany and Greece.
He said Greece would do everything to avoid any default and said he was confident that Athens and its partners would "put the D-word out of court.
"We didn't discuss Greece's debt schedule for repayments, we didn't discuss a (debt) haircut," Varoufakis said.
He said the Greek government is looking for a bridging programme between now and the end of May to give room for talks on "a new contract" with the European Central Bank, International Monetary Fund and European Union.
Schaeuble renewed offers to help Greece strengthen its tax system and said some things the new government has announced go in the right direction, such as getting the rich to pay tax and combating corruption.
But he said that some of the measures announced "don't necessarily go in the right direction".
The discussions came as jittery investors dumped Greek shares after the European Central Bank tightened the screws on the country's banking system. At one point, the interest rate on Greece's 10-year bonds ratcheted 0.63 percentage point higher to 10.42 per cent, but an easing of concerns saw it back down at 9.71 per cent.
The Greek government played down the impact on Greece's banking system from the ECB's move, insisting it would stick to its anti-austerity agenda. It said the ECB ruling put pressure on Athens and its creditors alike to strike a deal.
"Greece now has clear negotiating strength," Prime Minister Alexis Tsipras told his party lawmakers after the new parliament was sworn in Thursday.