Are Greece and Germany on the brink of a deal?

The clock is ticking ever closer to midnight, but the sides could be edging toward an agreement.

by Rachel Savage
Last Updated: 23 Feb 2015

Greece and Germany might, just might, be inching back from the brink of a full-blown Grexit from the Euro. Signs are emerging this morning that German chancellor Angela Merkel may finally be prepared to give the green light to a deal that would save the Greeks from bankruptcy, while easing some of the strict austerity conditions of their previous bailout.

Yesterday afternoon, it looked as if a deal had been sealed to keep Greece in the money and, more importantly, in the Eurozone. Leather-jacketed Greek finance minister Yannis Varoufakis had drawn up a plan with his previously unflinching Dutch counterpart Jeroen Dijsselbloem, European Commission president Jean-Claude Juncker had given the thumbs up and French president François Hollande even phoned Greece’s prime minister Alexis Tsipras to congratulate him.

But then Germany said a firm, unequivocal ‘nein’ to the proposal, which would have given Greece a stop-gap six month loan, after the current bailout runs out next Friday, and some breathing space on austerity. In return, the Greeks had promised to pay their debts and not take any ‘unilateral actions’ in the meantime.

‘The letter from Athens offers no substantial solution. It focuses on bridge financing without meeting the conditions of the programme,’ the German finance ministry said in a statement. One official reportedly called the Greek offer a ‘Trojan Horse’. Oo-er.

Varoufakis wasn’t having any of it – in public at least. ‘We have bent over backwards to reach an accord,’ he told the Telegraph (the offer was indeed far more conciliatory than the Syriza party’s initial left-wing populist firebreathing).

‘We have already done more fiscal tightening than has ever been done by any country in peacetime, and Greece is still in depression,’ he pointed out. Greece’s downturn was almost as deep as America’s in the Great Depression, but it’s already longer, according to data pulled together by the Economist earlier this week.

Varoufakis still has time for a bit of culture inbetween negotiations.

So last night the gulf between Greece and Germany – the EU’s largest economy and effectively the Greeks’ paymaster – looked unbridgeable (again). But this morning Merkel has been telling the German press the Greeks still haven’t gone far enough, but that their request was a good basis for this afternoon’s talks.

That’s much more positive than the hardline rhetoric coming out of Berlin yesterday. And Merkel has a track record of letting her finance minister Wolfgang Schaueble push negotiations to the wire, wringing as many concessions from the other side as possible, before deigning to wave a deal through.

The Germans don’t have the upper hand all to themselves: countries including France and Italy had already started to voice their support for the Greeks yesterday. And Italian prime minister Matteo Renzi has on a diplomacy blitz this morning, trying to shift some of the more ‘rigid’ Eurozone members (read: Germany).

But despite all the huffing and puffing from both sides in public a deal may still be on the cards – which is probably just the way Merkel planned it.

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