Greece in tough climbdown on radical debt promises

GREECE’S radical left government was at pains Saturday to put a positive face on an EU compromise deal that is sharply at odds with its anti-austerity ambitions.

At a last-ditch meeting on Friday, Europe gave Athens some breathing room to present alternative reforms in a bid to save its crucial financial lifeline.

But the new leftist Greek government, which came to power last month pledging to end deeply unpopular austerity measures, has just two days to submit proposals that will satisfy its sceptical peers.

“Greece is heading in a new direction,” said government spokesman Gabriel Sakellaridis, adding that the talks had yielded “significant benefits for the Greek people”.

Greece had asked for six-month loan assistance from its European creditors to enable it to submit a new four-year reform blueprint that would scrap the harshest austerity measures.

Instead, it received a maximum four months in which to reach an agreement, but no money to tide it over in the meantime.

The government said it had averted threatened cuts to pensions and tax hikes, and had persuaded its European creditors to drop unrealistic budget demands.

But the opposition socialists said the deal took Greece “kilometres backwards” and accused the government of engaging in “theatrics for domestic consumption”.

The liberal Kathimerini daily spoke of a deal with “stifling” conditions, while the centre-left Ta Nea said “both sides had made compromises”.

To win the hard-fought deal, Athens agreed to submit a list of economic and other reforms by Monday.

The government pledged to refrain from one-sided measures that could compromise existing fiscal targets, and had to abandon plans to use some 11 billion euros in leftover European bank support funds to help restart the Greek economy.

On Tuesday, the hated “troika” of creditors will decide whether to proceed with Friday’s agreement, with the chance that the compromise could be scrapped if they are not satisfied.

“If the list of reforms is not agreed, this agreement is dead,” Greek Finance Minister Yanis Varoufakis admitted after the talks.

The government had promised to spend 2.0 billion euros this year on poverty relief for thousands of families hit by five years of wage cuts and tax hikes.

Last week it presented legislation offering debt forgiveness to low-income citizens owing money to the state, but Brussels has now demanded to vet such measures beforehand.

The 19 eurozone finance ministers reached the agreement at tense talks pitting Greece against an angry Germany, suspicious that the new government in Athens was looking to ditch its austerity obligations.

“The meeting was intense because it was about building trust between us,” said Eurogroup head Jeroen Dijsselbloem, after the talks ended with a two-page statement setting out the tough conditions Athens will have to fulfil.

“This trust will be on the basis of the agreements and changes in the agreements which will have to be worked out,” he said.

Two previous rounds of talks failed in acrimony with Greek accusing Berlin and other hardline member states of sabotaging a deal.

“Being in government is a rendez-vous with reality. Quite frequently it is not as nice as the dream,” said German Finance Minister Wolfgang Schaeuble, Greece’s harshest critic who has fought the new government’s demands every step of the way.

He added that the deal promised to be a tough sell to government supporters.

If Athens sticks to its commitments, it stands to receive up to 7.2 billion euros in funds still left in the EU portion of its 240 billion euro bailout ($273 million).

Markets reacted positively to the deal, with the Dow and S&P 500 surging to fresh records on Wall Street as fears of a catastrophic exit by Greece from the euro receded.

European officials said the standoff had come down to a clash of personalities with Schaeuble furious at the negotiating style of the casual Varoufakis.

After the talks, a key European official said the Schaeuble-Varoufakis relationship was still fraught.

“The trust just isn’t there. (This time) Varoufakis kept a very low profile,” the source said.