March 02, 2015


Is the ECB junior to the IMF?

It looks like a concerted effort to de-escalate a stand-off: Bild Zeitung printed an article by Christian Odendahl from CER, pleading to give Greece a chance. Wolfgang Schaeuble tells Bild am Sonntag that one has to give the new Greek government a bit of time and said he is confident that they will fulfil the necessary conditions to resolve the debt crisis.  Jeroen Dijesselboem, in an interview to the FT, gave a conciliatory perspective about what happened in and between the eurogroup meetings. The complete write up on the FT Brussels blog tells us a story of miscommunication and poor diplomacy over the various eurogroup statement drafts and Greek letters, that it was the smaller countries who were the most adamant critics of the new Greek government and that Alexis Tsipras was ready to negotiate a compromise while his government was not yet fully on board. Dijesselbloem also played down press reports of issues between him and Yanis Varoufakis, saying it is all rubbish and that it is his job to push ministers towards a solution.

Djisselbloem even opened the door to future compromise on short term financing saying he would be ready to disburse a partial tranche in March already if there is visible implementation progress in Greece. All good, then?

Well, not quite. The Greek government announced new legislation for this week without consulting with its partners and it annoyed some European officials who deplore the lack of communication with Athens. Kathimerini reports that Tsipras announced four draft laws to be unveiled this week in order to tackle the social impact of the crisis, to introduce a new payment scheme for overdue debts to the state, to protect primary residences from foreclosures and to reopen public broadcaster ERT. It is not clear whether the Greek government considers those measures as not fiscally relevant enough to warrant prior consultation with the partners, or whether it was done out of urgency. Macropolis writes that these bills will help Tsipras win over doubters in his own party, who had a go at the agreement this weekend. His leadership has a strong backing in the public, though, according to the latest polls. 

Inside Syriza there are serious objections against the eurogroup agreement, according to @EfiEthimiou. The left platform submitted a proposal to the Central committee of the party against the agreement. They were downvoted by 55.76% against 41.21%, according to @YanniKouts. Alexis Tsipras also seems to shy away from an open debate about the agreement in parliament, which is not necessary but called upon by some MPs.

Yanis Varoufakis, meanwhile, got our attention with his suggestions that ECB might be junior to the IMF. In an interview with Associated Press Varoufakis said Greece will prioritise debt repayments to the IMF, but repayments to the ECB are "in a different league" and will need discussion with Greece's creditors. There are €1.6bn due to be repaid to the IMF in March, and €6.7bn repayment of ECB loans in the summer. On Skai TV Varoufakis suggested that Greece should negotiate this, as Greece has not the money to pay. Athens wouldn't ask for a delay in repayment in its ECB obligations, he said, but for something that would make the repayments easier to achieve. This would be part of the overall negotiation about debt sustainability. He said it would be excellent if Greece could agree with its partners to “to smooth over this cash flow hump” that Greece is facing over the next few months. Some Greek economists suggested to lengthen the maturity of the bonds by another 20 years, the FAZ reports. Under this scenario, the Greek government would only need a primary surplus of 1.5% this year and 2% thereafter, compared to 3.5% and 4% under current calculations.

In a speech to the Syriza central committee on Saturday, Alexis Tsipras accused the governments of Spain and Portugal of forming an axis against Greece, Katimerini reported. Tsipras claimed the goal was to make Syriza's position untenable in Greece, for domestic political reasons as both Spain and Portugal are going to the polls later this year. Antonis Samaras replied that Tsipras creates imaginary enemies to justify his own problems. 

The reaction from Portugal was muted. According to Jornal de Negócios Pedro Passos Coelho denied any idea that Portugal was one of the eurozone countries most demanding of Greece. While Portugal's government limited itself to expressing its perplexity, Spain's government went all the way to asking the European Commission for a formal reprimand of Greece, reports El Mundo. Spain's stronger reaction is related to the electoral climate, as Rajoy's public response to Tsipras came at an Andalusian regional pre-election event where he said Spain is not responsible for the frustration generated in Greece by Syriza's inability to enact its promises, writes El Mundo in another story. It appears that warning voters about the frustration they will suffer if they vote for new up-coming parties such as Podemos and Ciudadanos will be one of the themes of the PP's campaigns this year.

On a related note, we note a video comment by Helena Garrido, editor of Negócios, who warned against conflating the debate on Greece's confrontational stance with the broader debate on the need to reform Europe's economic policies. She said by not siding with Greece, Portugal's government acted according to the interests of the country given its own rescue program and the need for market access.

Our other stories

In the rest of our coverage we look at some select commentaries on Grexit and alternative financing for Greece; on Spain’s balance of payments; and on the large multipliers in the eurozone.

Eurointelligence Professional Edition

For premium access, please log in or register 
for a free 14 day trial for the Eurointelligence Professional edition. The best independent intelligence on the eurozone anywhere in a fast and easy to read format.

A message from Wolfgang Münchau

Welcome to the homepage.

Since 2006 we have been providing our readers from central banks, European and international institutions and the financial sector with our daily morning newsbriefing, each morning, at 9am CET, Mondays to Fridays. We are independent from governments and institutions, so you get our honest, sharp and frequently humorous take on the news and the debate. The subjects we are currently focusing on are the now clearly visible economic slowdown, the sustainability of the Italian debt, whether the economic recovery in Spain is for real and our assessment of the impact of the geopolitical tensions in Eastern Europe in particular. Naturally we also follow the ECB and the European institutions as they work through the crisis.

You might ask, is the eurozone still important, since the acute phase of the crisis is over for now? Unfortunately, few of the problems have been resolved. This is something you will quickly notice once you start reading the briefing on a daily basis: there is no better and quicker way to keep yourself ahead of events in the eurozone.

I would like to invite you to register for a free 14-day trial, without commitment, so you can judge for yourself.

Wolfgang Münchau
Director Eurointelligence