wsj.com/ French Finance Minister Says Greece Needs ‘New Contract’ with Europe

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SHAFAQNA (International Shia News Association) French finance minister Michel Sapin said on Sunday that Greece needs to forge a “new contract” with Europe, the first sign of a more conciliatory response to Athens’s demands to overhaul the country’s bailout.

Mr. Sapin made the comments at a news conference in Paris alongside Greek Finance Minister Yanis Varoufakis, who is on a tour of European capitals after his radical-leftSyriza party won snap elections in Greece last week.

The new Greek government has so far had little success garnering support for debt relief for its €240 billion bailout, or changes to the terms of the deal with eurozone countries. In contrast with France, Germany has shown a tougher line by saying rules on the bailout can’t be broken and warning Athens not to blackmail its European partners.

On Sunday, Mr. Sapin indicated France—which has lent around €41 billion to Greece through various mechanisms—is more open to renegotiating terms of the debt and the bailout as part of a broader agreement with Athens, even if writing off the debt isn’t an option.

“Debt is only one of the issues, among others, that must be included in a new contract between Greece and its partners,“ Mr. Sapin said. ”The new contract would show the obligations each party has within European rules and allow Greece to demonstrate its will to reform.”

The meeting is the second held by Mr. Varoufakis with a eurozone minister since he took the job earlier this week. Signs of antagonism were clear at the first meeting with Dutch Finance Minister Jeroen Dijsselbloem when Mr. Varoufakis slammed the current bailout for being “based on an anti-European logic” and said his government wouldn’t work with existing negotiators to extend the program. Mr. Dijsselbloem warned Mr. Varoufakis not to make any unilateral moves.

The meeting in Paris was less frosty. Mr. Varoufakis said he couldn’t disagree with anything Mr. Sapin said, and the French finance minister said he shared deep political convictions with his Greek colleague.

The more cordial meeting reflects the French government’s effort to find a middle ground in tensions with the European Union since the radical-left party Syriza came to power last week. French President François Hollande will meet with Greece’s new Prime Minister Alexis Tsipras on Wednesday and has said all parties should show both solidarity and responsibility in regard to the Southern European nation.

Paris’s attempts to mediate come amid its own tensions with the European Union. The French government has repeatedly failed to bring its deficit within European rules and the European Commission—the EU’s executive arm—is scheduled to decide in March whether it will begin proceedings that could ultimately result in financial sanctions against France. Mr. Sapin has said the election of Syriza in Greece bolsters the case for reviewing austerity policies throughout the currency bloc.

“France wants to show friendship and stand by Greece,” Mr. Sapin said. ”We can be the link that allows Greece and its new democratically elected government to succeed.” he said.

The Greek government says it will not extend the current bailout agreement, which runs out at the end of February. Mr. Varoufakis said his government will prepare proposals for an overhaul by the end of February that would pave the way for the negotiation of that new “social contract” between Greece and its European partners that would be hammered out by the end of May.

Greece’s current bailout program runs out at the end of February and, by then, the new government will have to close a continuing review of the country’s current program and agree on a credit line for the next day.

So far, the Greek government has said it would not ask for an extension of the program.

But, late Sunday, the deputy Prime Minister Yannis Dragasakis said a political agreement with the country’s international creditors might be in place as soon as Wednesday, during a meeting between Mr. Tsipras and European Commission President Jean-Claude Juncker.

“During the meetings there might be a political agreement, which will make the extension of [the current bailout program] unnecessary,” Mr. Dragasakis told broadcaster Mega TV. He didn’t exclude the possibility that Greece might need to ask for an extension later in February, during a meeting of Eurozone finance ministers.

A top European Central Bank official said Saturday that the central bank will stop lending to Greek banks if there is no agreement to keep the country’s bailout program in force.

This disagreement “has to be resolved somehow, or else we don’t have the possibility to continue extending credit [to Greek banks],” said Bank of Finland Governor Erkki Liikanen, who is also a member of the ECB’s governing council.

“There could be various forms [of agreement], that will ensure the ECB, so that it can continue its liquidity [to the Greek banking system],” Mr. Dragasakis added, indicating that the political agreement that could be in place by Wednesday would secure a form of extension to the country’s current program.

Mr. Varoufakis is set to continue his tour of European capitals with scheduled trips to London and Rome in the coming days. He said he had also received a letter from German Finance Minister Wolfgang Schäuble and would meet him as soon as possible.

A spokeswoman for the German finance ministry declined to comment on a possible meeting but confirmed Mr. Schäuble had written to his Greek counterpart, without elaborating on the content of the letter.

Reiterating a previous ministry position, she said Germany was ready “to cooperate with and to help Greece,” adding that Greece hadn’t filed a request for an extension of its current program. Talks of debt forgiveness or a debt conference were “disconnected from reality,” she said.

 

 

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