European finance ministers were huddled Saturday in tough negotiations that are likely to determine whether debt-ridden Greece remains a member of the Eurozone or gets cut loose to face almost certain financial collapse.
The meeting in Brussels was expected to last for hours as officials debated not just Athens’ pledges to reform its economy and cut spending in exchange for bailout loans, but also whether it could be trusted to follow through on those commitments.
In an about-face, the Greek government submitted proposals earlier this week including billions of dollars in austerity cuts to try to satisfy lenders’ demands for more belt-tightening. But many of Athens’ European partners are skeptical that the plan would actually be put into practice, since the Greek government actively urged voters to reject more austerity in a snap referendum last Sunday.
“It will be quite a difficult meeting still,” said Dutch Finance Minister Jeroen Dijsselbloem, who is leading the talks. “There are many concerns — quite a bit of criticism both on the content of the proposals but also on the even more difficult issue of trust. How can we really expect this government to implement what it’s now promising?”
Athens has requested a three-year rescue package worth about $60 billion in loans. Such a bailout would be Greece’s third in five years.
To live within its means, the Greek government has proposed spending cuts and tax increases worth about $13 billion. The offer is an embarrassing step back for Greek Prime Minister Alexis Tsipras, whose left-wing Syriza party took power in January on a promise to eliminate austerity and called last weekend’s plebiscite to reinforce that message.
European finance ministers are not expected to seal an agreement on a bailout Saturday but rather to decide only whether Athens’ offer is sufficiently credible to justify continued negotiations.
A thumbs-down would probably set off a chain of events starting with the rapid failure of Greece’s banking system, which is currently being propped up by emergency funds from the European Central Bank. Unable to access more euros and pay its bills, Athens would be forced to start printing its own devalued currency.
An exit from the euro currency union would decimate Greece’s already devastated economy, which has shrunk 25% since 2009 after repeated rounds of austerity cuts.
But a so-called “Grexit” would also deal a heavy blow to the rest of the European Union, which sees the euro as its most important symbol of greater integration among EU countries. Membership in the currency union was supposed to be irreversible; the banishment of Greece would call into question the viability of the alliance.
Even so, the finance ministers appear divided over whether to extend Greece a further lifeline or cut it loose.
Leading the skeptics is Germany, the Eurozone’s most important country and Greece’s biggest lender. Several German officials have said that Athens has no more credibility after years of accepting bailouts without implementing reforms, and have openly called for its expulsion from the Eurozone.
“We will definitely not be able to rely on promises,” Wolfgang Schaeuble, the German finance minister, said upon arriving at the talks in Brussels.
He added that optimism and goodwill toward Athens had been “destroyed by the last months” of brinkmanship by Tsipras’ government, which abruptly broke off talks late last month in order to hold its referendum last weekend. Fellow Eurozone leaders were stunned by the decision.
Berlin has also rejected one of Greece’s key demands: some kind of relief or restructuring of the country’s crushing public debt, which has ballooned to about 180% of gross domestic product. The United States, the International Monetary Fund and many analysts say that easing Greece’s debt load is crucial if the economy is to start growing again.
In recent days, France has emerged as Greece’s biggest ally in trying to convince other European nations of Athens’ sincerity and of the importance of maintaining the integrity of the Eurozone.
Spain and Italy have also described the recent Greek proposals as a promising start and a possible basis to continue negotiations.
“Credibility is very low, and so we will see,” Spanish Finance Minister Luis de Guindos said before he headed into the meeting in Brussels on Saturday. “I hope that Grexit will not take place.”
