Cautious hope for Greece debt deal as leaders tour Europe

Greek Finance Minister Yanis Varoufakis. Photo: 30 January 2015 Image copyright EPA
Image caption Yanis Varoufakis has repeatedly stressed his refusal to work with the "troika" overseeing Greek debt

Greece's leaders have received a guarded welcome to their reported proposals for a debt deal, ahead of crunch talks with EU creditors.

After a meeting in Rome with Greek PM Alexis Tsipras, Italian PM Matteo Renzi said his country would "give Greece a hand" without always agreeing with it.

Greek Finance Minister Yanis Varoufakis has reportedly suggested a new deal for exchanging debt with bailout creditors.

The radical left Greek government was elected on a pledge to end austerity.

The Syriza party, led by Mr Tsipras, won last Sunday's vote by promising to write off half the country's massive debt, sparking alarm on the markets and among eurozone officials.

The Greek government also said it would refuse new loans from the EU and the IMF, prompting questions about how it would finance itself.

This week, however, Greek leaders on a tour of European capitals sought to allay some of the concerns.

According to the Financial Times newspaper, Mr Varoufakis has retreated from the idea of writing off debt, instead suggesting that it could be exchanged for bonds that would be repaid only if the Greek economy grew.

Image copyright AP
Image caption In Rome, Mr Renzi presented Mr Tsipras - noted for his informal attire - with an Italian tie

The president of the European Commission, Jean-Claude Juncker, has said the bloc will "have to adapt a certain number of policies" to accommodate Greece.

Mr Tsipras meets Mr Juncker in Brussels on Tuesday. He will also travel to France to meet President Francois Hollande, whose government has also suggested a softer line on Greece.

At the meeting with Mr Renzi in Rome on Tuesday, Mr Tsipras said Europe had to "put social cohesion and growth before the policies of poverty and insecurity".

Mr Renzi echoed him, saying that the world was "calling on Europe to invest in growth, not austerity".

However, he did not comment on the details of Greece's proposals.

Despite the conciliatory remarks, many hurdles remain.

"Varoufakis is intelligent, but he is underestimating the problems," a eurozone official quoted by the Reuters news agency said.

'Ending the addiction'

Greece still has a debt of €315bn - about 175% of GDP - despite some creditors writing down debts in a renegotiation in 2012.

German Chancellor Angela Merkel has ruled out debt cancellation, saying creditors had already made concessions.

This week, Mr Varoufakis said that he wanted a new plan for fiscal stimulus in place by the end of May, with repayment of existing debt tied to Greece's ability to restore growth.

Image copyright AP

Greek economy in numbers

  • Unemployment is at 25%, with youth unemployment almost 50%
  • Economy has shrunk by 25% since the start of the eurozone crisis
  • Country's debt is 175% of GDP
  • Borrowed €240bn (£188bn) from the EU, the ECB and the IMF

Mr Varoufakis added that he would negotiate separately with the European Commission, the IMF and the European Central Bank but not with officials representing all three - the so-called "troika", which he described as a "committee of technocrats".

The troika agreed a €240bn (£179bn; $270bn) bailout with the previous Greek government.

Austerity measures imposed in an effort to manage the debt prompted outrage in Greece and led voters to reject the previous government.

Instead, Greeks voted Syriza into power after an election campaign dominated by the party's message of change.

In interviews in the German media published on Saturday, Mrs Merkel said she still wanted Greece to stay in the eurozone but did not "envisage fresh debt cancellation".

Greece's current programme of loans ends on 28 February. A final bailout tranche of €7.2bn was still to be negotiated but the new government has already begun to roll back austerity measures.

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