February 10, 2015 / 5:29 PM / 3 years ago

EU's Juncker steps up contacts with Greece, scant progress so far

Greek Prime Minister Alexis Tsipras listens to the speech of Greek Finance Minister Yanis Varoufakis (not pictured) before a vote of confidence at the parliament in Athens February 10, 2015. REUTERS/Alkis Konstantinidis

ATHENS/BRUSSELS (Reuters) - European Commission President Jean-Claude Juncker stepped up contacts with Greece’s new leftist leader on Tuesday to try to bridge differences on the country’s debt crisis but EU officials cautioned against expecting any breakthrough this week.

Before crunch meetings of euro zone finance ministers on Wednesday and EU leaders on Thursday, Juncker telephoned Prime Minister Alexis Tsipras to seek a formula for extending euro zone assistance to Athens after its international bailout expires at the end of this month.

The EU executive said the conversation took place in a “positive spirit of cooperation”, seeking to calm rising alarm in Western capitals at the risk of a Greek exit from the single currency area that could trigger wider financial instability.

However, Greek Finance Minister Yanis Varoufakis refused to rule out a standoff with his country’s creditors. “We’re not seeking a clash. We will do everything to avoid it,” he told parliament, but added: “If you’re not willing to even consider a clash, you’re not negotiating.”

German Finance Minister Wolfgang Schaeuble and a Commission spokeswoman dismissed media reports of an EU compromise plan that lifted Greek and European financial markets and the euro on Tuesday.

“There is no Juncker plan at this stage, of no matter how many points, there is no such plan at this stage,” Commission spokeswoman Mina Andreeva told journalists in Brussels.

“That being said, of course very intense contacts are going on between the president, prime minister Tsipras and other players involved in the euro zone and beyond, but up to this point all these contacts have not been very fruitful.”

EU Economic Affairs Commissioner Pierre Moscovici said a meeting of Eurogroup finance ministers on Wednesday would be decisive, and reaffirmed the EU’s insistence that the Greeks must request an extension to its current bailout program for a solution to be found.

“They know the program is our reference and framework. We have to see what kind of solutions we can decide inside this framework, not outside it,” Moscovici said.

Tsipras has said Athens has no intention of requesting an extension of the 240 billion euro EU/IMF program and is intent on reversing what he has called “cruel” austerity imposed by foreign creditors that has impoverished many Greeks.

His tough stance has proved popular at home, with 75 percent of Greek backing him, an opinion poll showed.

Schaeuble said after a meeting of G20 finance ministers in Istanbul that if Greece did not want a new aid program “then that’s it”, adding he expected to hear something binding from Athens on Wednesday.

“PLAN B”

Maintaining a drum beat of hostile rhetoric for domestic consumption as the radical administration seeks a parliamentary vote of confidence later on Tuesday, Defence Minister Panos Kammenos said Greece could look to Russia or China if it failed to get a new debt deal with the euro zone.

”What we want is a deal,“ the hardline nationalist said on television. ”But if there is no deal ... and if we see that Germany remains rigid and wants to blow apart Europe, then we have the obligation to go to Plan B. Plan B is to get funding from another source.

“It could be the United States at best, it could be Russia, it could be China or other countries,” Kammenos added.

Underlining the fragile relations with some of Europe’s most powerful countries, Greek Foreign Minister Nikos Kotzias took his government’s claim for World War Two reparations directly to Berlin on Tuesday - and received a clear rebuke.

German Foreign Minister Frank-Walter Steinmeier said Berlin was fully aware of its political and moral responsibility for the “terrible events” in Greece during the Nazi occupation from 1941 to 1944. “Still, we are firmly convinced that all reparations issues, including forced loans, are judicially settled once-and-for-all,” he added.

Another minister announced in parliament plans to halt a Canadian-run gold mine project (ELD.TO) and cancel a development scheme at Athens’ former airport, part of a wider roll-back of privatisations that were agreed as a condition of the bailout.

Varoufakis has proposed a six-month transition during which Greece wants to be allowed to issue more short-term treasury bills, run a smaller budget surplus and receive European Central Bank profits on Greek bond holdings.

He said on Monday Athens wants to scrap about 30 percent of the current bailout’s conditions, to be replaced by measures approved by the Organisation for Economic Cooperation and Development, and implement 70 percent of the recommendations.

Greece would use the interim period to negotiate a rescheduling of its official debt, swapping euro zone government loans for GDP-linked bonds and ECB-held debt for interest-bearing perpetual bonds, he said.

EU officials say the proposals were unlikely to be acceptable in anything like their current form, but they might contain the seeds of a compromise under which debt repayments would be extended further into the distant future, with a longer grace period before interest payments fall due.

Euro zone creditors led by Germany, the bloc’s main paymaster, first want to see firm commitments to an economic reform program under outside supervision incorporating policies agreed by the previous conservative-led government.

Additional reporting by Jan Strupczewski and Gernot Heller in Istanbul, George Georgiopoulos, Renee Maltezou, Lefteris Papadimas, Costas Pitas and Jeremy Gaunt in Athens, Adrian Croft and Tom Koerkemeier in Brussels, Michael Nienaber in Berlin; Writing by Paul Taylor; Editing by Giles Elgood and David Stamp

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