Greece's new left-wing government went into a showdown with sceptical European partners on Wednesday as it laid out demands to renegotiate its huge bailout at crunch talks in Brussels. Eurozone finance ministers heading into the emergency meeting said they were ready to listen to Greece's plans for a new debt programme, but insisted that Athens must complete austerity reforms.
They also warned that no solution was expected on Wednesday, meaning negotiations over Greece's 240 billion euro ($270 billion) EU-IMF bailout are likely to go down to the wire at their next meeting on Monday. Greece's bailout expires at the end of February, leaving it at risk of a default which would send it crashing out of the euro, and Athens is seeking a credit line until September while it drafts more reforms.
"I don't expect an outcome today. This is just the start of our talks," Dutch finance minister Jeroen Dijsselbloem, the head of the Eurogroup of 19 eurozone finance ministers, said as he arrived. "I'm open to listen. I will express my hope that they stick to the reform path.... and it is crucial for Greece to maintain that path. How and under what conditions that will be for discussion for today."
It is the first confrontation between Greek Finance Minister Yanis Varoufakis and all his counterparts, but the former economics professor was uncharacteristically quiet as he went into the talks. "Of course not," Varoufakis replied when asked if a so-called "Grexit" from the euro was likely. "I am confident we are going to have a very constructive meeting today," added the minister, who typically eschewed the suit and tie favoured by his colleagues for a tartan scarf and untucked shirt.
Varoufakis met with International Monetary Fund (IMF) head Christine Lagarde before he sat down with the ministers, hoping to win the backing of Greece's other major creditor from the bailouts that began in 2010. European stocks pulled back on the continuing unease over Greece, with the Athens market slumping four percent, while US stocks were mixed as investors awaited the outcome of the Brussels talks. A key part of the talks will be resolving differences between Greece and Germany, with Europe's biggest economy fiercely opposing any bid by Athens to reduce its debt or abandon austerity.
Finance Minister Wolfgang Schaeuble, whose first meeting with Varoufakis last week was a chilly affair during which the Greek minister referenced Nazi era history, took a tough line in Brussels. "Either the (bailout) programme is run to the its conclusion or there's no more programme," he said. But Greece's radical new Prime Minister Alexis Tsipras is riding a wave of popularity at home, winning a confidence vote on the back of the 40-year-old premier's defiance of Germany and austerity.
More than 15,000 people turned out on Athens streets Wednesday evening in a display of support for the government's programme, according to police. The Greek proposal would see Athens stick to 70 percent of its bailout reform commitments but overhaul the remaining 30 percent. Greece also wants a debt swap that will free up funds for economic growth. Crucially, the government wants a bridging loan until September to buy time to hammer out new reforms.
At the same time it insists on raising the minimum wage and ditching an unpopular property tax, reversing key reforms demanded by the EU and IMF of previous Greek governments. It also wants to ditch inspections by the hated troika of creditors - the European Commission, IMF and European Central Bank. Tsipras announced plans on Wednesday to draw up a new programme of reforms with the OECD - the economic club of rich nations that has criticised the EU's embrace of austerity.
But Greece has also ramped up threats to look to Russia or China for help, further raising the stakes for European unity as it wrestles with economic stagnation and the crisis in Ukraine. Tsipras has been invited to Beijing to meet his Chinese counterpart Li Keqiang, a government source said Wednesday. Russian Foreign Minister Sergei Lavrov meanwhile said during a visit to Moscow by Greek counterpart Nikos Kotzias that Moscow was ready to consider an appeal for aid by Athens. His statement will fuel fears in Brussels that Tsipras is too close to Moscow at a time when the EU is locked in a stand-off with Moscow over Ukraine.