Greece bailout plans: Talks in a tangle

German Finance Minister Wolfgang Schaeuble attends an emergency Eurogroup finance ministers meeting at the European Council in Brussels on February 11, 2015. Image copyright Getty Images
Image caption German Finance Minister Wolfgang Schaeuble has insisted Greece must stick to the existing terms of its bailout

Brussels is the capital of late night compromises. But this time it was different.

The post-midnight faces of three European officials and the head of the IMF looked weary.

There had been seven hours of talk without agreement.

You knew at once they had failed to reach a deal with Greece when the head of the Eurogroup, Jeroen Dijsselbloem, said: "You can ask me what you want but you'll get the same answer."

This was an official sticking closely to a script, which tried to portray intense and constructive discussions.

There had been several attempts to draw up a statement to be released at the end of the meeting, but they could not even agree on joint conclusions.

Image copyright Getty Images
Image caption Eurogroup head Jeroen Dijsselbloem said the different sides needed to find common ground

And here was the new politics of Europe at work.

Greek Finance Minister Yanis Varoufakis was regularly on the phone to Athens. And there, in front of the Greek parliament building on a bone-chillingly cold night, were 15,000 people urging their new government to fight its corner.

Clock is ticking

There will be another meeting of eurozone finance ministers on Monday.

One plan had involved setting up a working group to use the next few days to work on future steps. Even that proved impossible. To do that, Mr Dijsselbloem said, "We need to have common ground". They don't. They did not even discuss detailed proposals.

The meeting started with Mr Varoufakis setting out the Greek position. His tone was co-operative but some of the other finance ministers wanted more detail.

All of them are aware that the clock is ticking. If there is not an agreement within two weeks to extend the current bailout then Greece will not be eligible for a €7bn (£5.2bn; $7.9bn) loan and, shortly after, will run out of money.

Image copyright EPA
Image caption Greek Finance Minister Yanis Varoufakis set out his proposals for a new debt deal

But therein lies the heart of the problem. The new Greek government will not agree to extend the existing bailout because it blames the deal and austerity for devastating the Greek economy.

As Prime Minister Alexis Tsipras said earlier this week, 1.5 million people lost their jobs under the plan and 2.5 million are living below the poverty line. So the bailout, overseen by a troika of EU, IMF and ECB officials, has been branded toxic.

For the newly-elected government in Athens it is impossible to continue with an agreement which they campaigned so strongly against.

Image copyright AP
Image caption Anti-austerity protesters rallied in front of Athens parliament to back the government's debt negotiations

The other finance ministers of the eurozone insist that Greece has to stick to commitments already made. Those commitments include controversial pension reforms and cuts to the public sector.

Greece has been loaned €240bn (£182bn) to save it from bankruptcy and to keep it inside the eurozone, but it came with conditions.

Some ministers reminded Mr Varoufakis that they also had voters and many of them were not minded to back further assistance to Greece.

It is also the case that any new deal would have to go before four parliaments, including the German Bundestag, where sentiment is running strongly against further aid for Greece.

One senior MP from Angela Merkel's CDU party complained: "The new leadership in Athens is taking the liberty of directly provoking Germany. It decreases our willingness to help towards zero."

Deadlock

So where do things go from here?

Firstly the Greek government has already shifted its position. From outright opposition to the existing bailout deal it has announced it only finds 30% of it "toxic". In some circles on the left in Greece that is already being portrayed as a sell-out.

What Greece is looking for is a bridging agreement that takes it through to August.

In the meantime it wants a comprehensive negotiation which links debt repayments to growth and tackles its debt burden, which is "unsustainable".

Image copyright AP
Image caption Prime Minister Alexis Tsipras was elected on a promise to renegotiate Greece's bailout

At the same time it wants to raise the minimum wage, help out those who can no longer afford to pay for their electricity and rehire some civil servants.

The German position is that this negotiation needs to take place within the framework of the existing agreement. That is the only guarantee, in their view, that Athens won't go soft on reforms.

The new government argues that it is in the interest of Europe as a whole to end the Greek crisis and that would involve compromise.

At the moment there is deadlock. Alexis Tsipras cannot go back to the Greek people if the existing deal is extended. He will be accused of having misled the the voters. The Germans, the Dutch, the Spanish and others are not prepared to tell their voters that the Greeks are getting a new deal.

There is room for compromise. Yanis Varoufakis insisted after the talks that what he chose to call "a healing deal" could still be reached on Monday. And then there is the pressure of the markets.

If the European Central Bank, which meets next week, were to block further financing of the Greek banks then Athens would be facing bankruptcy within weeks.

None of the players in this drama wants to see Greece leaving the eurozone.

In the way that these matters are often resolved it may take a full-blown crisis day to engineer a compromise. But these are days when a miscalculation could be costly.