Austerity Queen Angela Merkel Ready for Compromise on Greece?

Talk of Compromise is in the air. Reports suggest that German Chancellor Angela Merkel and Greek Prime Minister Alexis Tsipras may both be willing to compromise. However, details are still sketchy.

Bloomberg reports Greece, Germany Said to Offer Compromises on Aid Terms

Greek Prime Minister Alexis Tsipras met his European Union peers at a summit for the first time Thursday and said afterwards he sees political will to agree on what happens after the current aid program expires this month. Greece’s goal remains a six-month bridge agreement that would lead to a new deal with euro-area authorities, he told reporters.

Behind-the-scenes negotiations resumed in Brussels hours after euro-area finance ministers failed to reach a joint conclusion. Greek negotiators and officials from its euro-area creditors plan to meet in Brussels Friday to discuss the way ahead as they struggle to decide whether to call the arrangement an extension, a new program or a bridge deal, officials said.

Deal Elements

Germany won’t insist that all elements of Greece’s current aid program continue, said two officials in Berlin. As long as the program is prolonged, they said, Germany would be open to talking about the size of Greece’s budget-surplus requirement and conditions to sell off government assets.

Greece’s willingness to hold to more than two-thirds of its bailout promises shows that Greece is broadly prepared to stick to the program, the German officials said. Improving tax collection and fighting corruption will win German backing, and getting a deal will depend on Greece’s overall reform pledges.

Greece is prepared to commit to a primary budget surplus, as long as it’s lower than the current 4 percent of gross domestic product, according to Greek government officials. Tsipras’s coalition also might compromise on privatizations, one of the officials said. The officials asked not to be named because the deliberations are private and still in progress.

Greece wants a “a new contract” in which “ our commitments for primary fiscal balances will be included and continuation of reforms,” Tsipras told reporters after the EU summit. “This also obviously needs to include a technical solution for a writedown on the country’s debt, so the country has fiscal room to return to growth.” 

Shifting Tone

In a bid to restart work toward a solution, Tsipras also met Thursday with Dutch Finance Minister Jeroen Dijsselbloem, who heads meetings of his euro-region counterparts. The Greek side agreed to let a team of euro-area experts “engage with the Greek authorities to start work on a technical assessment of the common ground” on future financing, Dijsselbloem spokeswoman Simone Boitelle said in an e-mail.

Greece agreed on Thursday to talk to its creditors about the way out of its hated international bailout in a political climbdown that could prevent its new leftist-led government running out of money as early as next month.

“(We) agreed today to ask the institutions to engage with the Greek authorities to start work on a technical assessment of the common ground between the current programme and the Greek government’s plans,” Dijsselbloem tweeted. This, he said, would pave the way for crucial talks between euro zone finance ministers on Monday.

Dijsselbloem was cautious about prospects for a deal, telling reporters: “It is going to be very difficult. It is going to take time. Don’t get your hopes up yet.”

On Wednesday night, euro zone finance ministers had failed to agree even on a statement on the next procedural steps because Athens did not want any reference to the unpopular bailout, nor to the despised “troika” of lenders enforcing it.

German Chancellor Angela Merkel, vilified by the Greek left as Europe’s “austerity queen”, said Berlin was ready for a compromise and finance ministers had a few more days to consider Greece’s proposals before next Monday’s meeting.

“However, it must also be said that Europe’s credibility naturally depends on us respecting rules and being reliable with each other,” she said.

“The real risk in Athens seems to be that Tsipras has raised expectations to such an extent that he could find it extremely difficult to back down from his rhetoric and strike a deal which the rest of the Eurozone could accept,” Berenberg Bank economists wrote in a note on Thursday.