A mishap should not seal Greece’s fate

by Martin Wolf

Financial Times
March 31, 2015

Since the election of Greece’s Syriza-led government, negotiations over its place in Europe have gone terribly, with posturing on one side and annoyance on the other. An accidental exit from the eurozone has become quite likely. This is not because Greece wants it nor because its partners are set upon it. It is because Greece is running out of hope, its partners are running out of patience and the negotiations are running out of time. A fork in the road does indeed lie ahead. But the choice of direction has to be deliberate, not accidental.

A looming liquidity crisis is the reason for fearing a precipitate decision. Greece’s creditors want the country to implement reforms before they unlock some €7.2bn in undisbursed bailout funds. Greece needs this money to meet domestic spending obligations and a €450m loan repayment due to the International Monetary Fund. Since the European Central Bank is curbing credit from Greek banks, the country’s government could run out of money. That might trigger a run by Greek depositors. While the ECB could manage this, it might feel unable or unwilling to do so.

A country is most likely to leave the euro if its government cannot meet its obligations, its banks close their doors, its economy is depressed and its politics are turbulent. Greece might soon be in this state. A chaotic exit may then occur. It is vital to avoid such a “Greccident”.

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When Will Greece Run Out of Money? The Short Answer

by Nektaria Stamouli

Wall Street Journal
March 31, 2015

Greece’s government is rushing to compile a list of economic overhauls to satisfy its creditors and secure desperately needed bailout aid. The cash-strapped country was hoping for a quick deal and an immediate disbursement, but European officials hint that several weeks might be needed before an agreement is reached.

But does Greece have that much time? Bills and debt repayments are looming, tax revenues have been weak, and every government ministry is looking under every sofa for cash.

Q: So, when will Greece run out of money?

A: The truth is: Nobody knows. Even Greece. “The liquidity situation is fluid,” some senior Greek officials say. Other Greek policy makers say the piggy bank will be empty by mid-April. In recent weeks the government has tried to meet both its obligations to creditors and domestic payments – above all, pensions and public-sector wages – but it has been slipping deeper into arrears with suppliers of goods and services to the public sector. Meanwhile the government hopes that its latest tax measures will boost revenues, but it’s unclear how effective they will be. When exactly the money runs out depends on how many more domestic payments the government is willing and able to delay.

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ECB Nerves Fray on Greece as Supervisors Rile Central Bankers

Bloomberg
March 30, 2015

Inside the five-month-old union between monetary policy and financial oversight at the European Central Bank, nerves are beginning to fray.

As officials under ECB President Mario Draghi seek to replace deposits fleeing Greek banks without blatantly financing the state, the efforts of the institution’s new Single Supervisory Mechanism to do its part are irking the old guard. Central bankers say they are concerned that overly-strict orders to lenders could worsen the Greek turmoil.

After building an institutional pillar that has supervised the euro area’s largest banks since November, the ECB is now facing one of the worst flare-ups in six years of sovereign-debt crisis. Officials must work out how to align their two policy arms in a way that can find a path through the Greek turmoil and set a template for handling banking turbulence to come.

“Clearly there is tension, and it was obvious from the beginning that there would be,” said Nicolas Veron, a fellow at the Brussels-based Bruegel research group. “But there’s a productive kind of tension, like there was between Treasury Secretary Tim Geithner and Federal Deposit Insurance Corporation Chair Sheila Bair in 2008. It could end up creating the right mix of policy.”

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The Meaning of Fingergate

by Anna Sauerbrey

New York Times
March 29, 2015

It was one of the finest, weirdest series of events in the history of German TV. On March 15 Günther Jauch, the host of one of Germany’s major political talk shows, interviewed the Greek minister of finance, Yanis Varoufakis. During the conversation he confronted Mr. Varoufakis with a video of him speaking at a conference in 2013 and literally giving the finger to Germany.

Mr. Jauch meant to expose what he considered an inappropriate tone in the debt crisis debate, particularly on the Greek side. “Germany is paying the most and is criticized the most. How does this fit?” he asked the Greek minister.

But Mr. Varoufakis did not answer. Instead, he claimed the video had been “doctored,” an allegation Mr. Jauch tried to disprove the next day, presenting “evidence” provided by several “experts” saying they could not find traces of manipulation.

The video threw Germany into an uproar. Then, on March 18 Jan Böhmermann, a young comedian hosting a late-night show, showed his own video, which seemed to demonstrate that he had doctored the scene.

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Greek Bailout Proposals Lack Necessary Detail, Officials Say

by Matthew Dalton

Wall Street Journal
March 29, 2015

Greek proposals for a revised bailout program don’t have enough detail to satisfy the government’s international creditors, eurozone officials said, making it more likely that Athens will need to go several more weeks without a new infusion of desperately-needed cash.

Officials from Greece’s leftist government were in Brussels over the weekend to present the proposals to officials from the European Commission, the European Central Bank and the International Monetary Fund—the trio of institutions representing the government’s creditors. Getting their thumbs-up is crucial for Athens to regain access to bailout funds and restore normal lending from the ECB.

The Greek government is facing a dire shortage of cash: It must pay salaries and pensions at the end of the month and repay debts to the IMF on April 9. While talks over the weekend were friendly, officials said, mistrust at a political level continues to stew between the outspoken government in Athens and the rest of the eurozone.

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Greece’s Fate Lies in Athens’ Hands, Not Berlin’s

by Simon Nixon

Wall Street Journal
March 29, 2015

One of the Greek government’s biggest mistakes since taking office in January has been to assume that its fate lay in German hands. For the first two months, it refused to deal with the “troika” of international lenders—comprising the European Commission, the European Central Bank and the International Monetary Fund—since renamed “the institutions,” now known as “the Brussels Group.” It was reluctant even to negotiate with the Eurogroup of European finance ministers, which has had political responsibility for overseeing all eurozone bailouts.

Instead, Prime Minister Alexis Tsipras believed that Greece’s fortunes hinged on a “political deal” that pitched Athens against Berlin. Over 10 hours of talks in both Brussels and Berlin, German Chancellor Angela Merkel tried to convince Mr. Tsipras that he was wrong: he had overestimated Germany’s power and underestimated the importance of respecting eurozone rules and processes. Mr. Tsipras may have dug himself into a hole by promising voters that he would end the bailout but Ms. Merkel could do little to pull him out.

That doesn’t mean Ms. Merkel is indifferent to Greece’s fate. Ms. Merkel doesn’t need homilies from anyone on the importance of keeping the eurozone intact. After all, she defied domestic opinion and the advice of senior ministers when she agreed to Greece’s 2012 bailout that prevented a messy euro exit. She said then, and repeated this month, that she believes that “if the euro fails, then Europe fails.” The German government is fully aware that a Greek euro exit could have geopolitical as well as economic consequences.

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Greece struggles to accommodate lenders as cash dwindles

by Peter Spiegel & Kerin Hope

Financial Times
March 29, 2015

Athens haggled with its lenders through the weekend to try to narrow differences over economic reforms, but remaining gaps suggested that there would be no immediate relief for Greece’s cash-strapped government.

Creditors have demanded that the country must implement reforms before they will unlock about €7.2bn in undisbursed bailout funds.

Both sides held lengthy talks over the weekend, including 10 consecutive hours on Saturday, after the Greek government sent a full list of reforms to bailout monitors late last week. Athens had set Monday as a deadline to finalise the list.

Officials who have seen the offering said that while it contained concessions, it lacked detail in some of the areas that have caused concerns during previous talks.

Without fresh funding, Athens risks running out of cash before meeting a €450m loan payment due to the International Monetary Fund next week. The credit rating agency Fitch downgraded Greece late on Friday to a “substantial credit risk”, citing “uncertain prospects of timely disbursement from official institutions”.

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Greece Discloses Expected Proceeds From Planned Piraeus Sale

Wall Street Journal
March 29, 2015

Greece has told creditors it expects to raise at least €500 million ($545 million) from the privatization of the Piraeus port, according to Greek officials.

The privatization plan has been controversial, and politicians in Greece’s new leftist-led government have publicly expressed conflicting signals about whether it would go ahead, spooking creditors. Privately, however, senior Greek officials have said it would proceed.

The decision to disclose to creditors the expected proceeds from the planned sale is the latest and clearest sign yet that the government in Athens plans to go ahead.

Greek officials also told creditors they will seek to privatize operating concessions at 14 regional airports, the Greek officials with knowledge of the situation said.

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Greeks Need Their Leader to Be Tough

by Hugo Dixon

New York Times
March 29, 2015

Does Alexis Tsipras, the prime minister of Greece, have the guts to break with his far-left faction? The country’s fate hangs on the answer.

Greece’s immediate prospects are dicey. It will default in mid-April unless its eurozone creditors lend it more money or it scrapes together cash from other sources.

The central short-term issue is whether the reform proposals that Athens plans to submit to creditors on Monday will be enough to unlock some credit.

The government sent negotiators to Brussels over the weekend to hash out the package after another week during which the technical teams on the ground in Athens achieved little. Meanwhile, Yanis Varoufakis, the finance minister, mused publicly about the possibility of a “rupture.” The implication was that Athens would default if it were not able to secure an acceptable deal with its creditors.

Such a rupture could happen as early as April 9, when Greece has to repay money it owes the International Monetary Fund. If Athens defaults then, capital controls would presumably be imposed at the same time, coinciding with the four-day Greek Easter holiday, which starts on April 10.

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Greece to pay pensions . . . for this month

by Kerin Hope

Financial Times
March 27, 2015

Some of the money has come through strong-arm collection tactics, and some through enticements.

Whatever the case, Greece’s leftwing government will be able to cover pension and civil servants’ salaries due at the end of the month, according to the deputy finance minister for expenditure, who has been frantically scraping together the funds in recent days.

“Whatever needs to be paid will be paid on time — that means wages, pensions and the subsidy to IKA (Greece’s biggest health and social security fund),” Dimitris Mardas told the Financial Times.

He dismissed speculation that the cash-strapped government would have to issue €500m of IOUs to cover part of the €1.7bn bill as “quite unfounded.”

However, Mr Mardas could not give any assurances about a separate €450m payment to the International Monetary Fund due on April 9, which is overseen by a separate department within the ministry.

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Neither Grexit, nor Grexident. Euro and 'drachma' in parallel?

Reuters
March 27, 2015

Greece is unlikely to exit the euro, either intentionally or accidentally. But it might be forced to introduce an alternative means of payment, in parallel to the euro, to pay some domestic bills if a reform-for-cash deal with its creditors is not secured soon, several euro zone officials said.

Athens has lost access to bond markets and international creditors are not willing to lend it more money until it starts implementing reforms. An official familiar with the matter told Reuters this week that without fresh funds, the government will run out of money by April 20.

"At some point, when the government has no more euros to pay salaries or bills, it might start issuing IOUs -- a paper saying that its holder would receive an x number of euros at a point in time in the future," one senior euro zone official said.

"Such IOUs would then quickly start trading in secondary circulation at a deep discount to the real euros and they would become a 'currency', whatever its name would be, that would exist in parallel to the euro," the official said.

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Greece’s German Allies Aghast as Tsipras Fails to Assure

Bloomberg
March 27, 2015

Even Greek Prime Minister Alexis Tsipras’s friends in Germany are getting exasperated with his government after a visit to Berlin fueled skepticism that he can do what’s needed to end the impasse over his country’s finances.

While the atmosphere was good in talks between Tsipras and Chancellor Angela Merkel this week, an improvement in tone may not help resolve a standoff over the reforms required to unlock aid, according to a German government official familiar with the chancellor’s strategy on Greece who asked not to be named because the meeting was private. Members of Merkel’s Social Democratic coalition partners, who have sought to strike a more moderate tone on Greece than her party, were left unconvinced that he can resolve the crisis.

“What’s coming out of Greece is moving completely in the wrong direction,” Joachim Poss, a Social Democratic lawmaker who is the party’s deputy parliamentary spokesman on finance policy, said in an interview. “The situation is really worrying -- we’re stunned watching the developments.”

Tsipras’s difficulty in persuading even more measured German policy makers he’s on the right track risks entrenching a conflict with Greece’s European creditors as his government runs out of money. More than a month after winning an extension of the country’s bailout deal, Greek officials will finally submit plans on how they’ll meet the conditions for releasing aid on Friday, an official from Tsipras’s administration said.

The delay led Thomas Oppermann, the Social Democrat Bundestag floor leader, to join Finance Minister Wolfgang Schaeuble in speculating about a possible Greek exit.

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In Germany’s shadow

Economist
March 28, 2015

The timing was certainly awkward. Talks between Greece and the euro zone were on a knife-edge. Beset by rumours that Greece was running out of money, Alexis Tsipras, the prime minister, had agreed to propose reforms to unlock bail-out funds. Then, just before Mr Tsipras was to visit Angela Merkel, Germany’s chancellor, a news magazine ran a cover of Mrs Merkel overlaid on an image of occupying Nazi forces at the Parthenon. “The German Übermacht (‘Dominance’)”, read the headline.

Insinuations that Germany’s tough line on debtor countries carries a whiff of the Third Reich have been common throughout the euro crisis, usually in Greece. But this time it was Der Spiegel, a respected German weekly, that made the comparison (depicting European perceptions, it insists). At a press conference with Mrs Merkel, Mr Tsipras condemned the cover (before repeating his call for war reparations). But as Greece again throws the euro zone into turmoil, Germany is facing awkward questions.

During the euro crisis, power shifted from European institutions to capitals, Berlin chief among them. On the urgent question of foreign policy, French weakness and British drift have shrunk Europe’s “big three” to one-and-a-half—if you are feeling generous towards France. In contrast to the apocryphal story of Henry Kissinger wondering what number one calls to speak to Europe, Barack Obama knows exactly whom to consult on Europe’s Russia policy—and she does not sit in Brussels.

German dominance is in part a consequence of others’ retreat. That may be why complaints have been muted. “If the Italians don’t bring pasta and the French don’t bring pâté,” says a diplomat, “you can’t complain about Mrs Merkel’s cabbage soup.” Meanwhile, outside Greece, the worst of the budget-cutting that bred European resentment of Germany is over. The recent solid economic performance of most bailed-out countries has strengthened Germans’ conviction that they were right all along.

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Greece Hurries to Hammer Out Policies to Satisfy Creditors

by Nektaria Stamouli and Viktoria Dendrinou

Wall Street Journal
March 26, 2015

Greece is hurrying to compile a list of economic overhauls that satisfies its creditors and secures desperately need bailout aid, as it runs increasingly low on cash and debt payments loom.

Key officials in Greece’s new government, led by the leftist Syriza party, were hunkered down in meetings Thursday to flesh out new economic policies with the aim of submitting a list of overhauls by Monday at the latest, senior officials said. Greece hopes that eurozone finance ministers can meet and approve the country’s overhaul program as early as next Wednesday.

However, officials from Greece’s European creditor countries said the economic plans would first need a positive response from technocrats representing European institutions and the International Monetary Fund.

Greece has accelerated its efforts on the overhaul plans in recent days after German Chancellor Angela Merkel worked hard to convince Greek Prime Minister Alexis Tsipras in Berlin on Monday that there is only one way for Athens to secure the financing it needs: substantive economic overhauls.

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Greece maintains claim to 1.2 billion euros in euro zone bailout fund

Reuters
March 26, 2015

The head of Greece's bank rescue fund maintained on Thursday that Athens has a legal claim to 1.2 billion euros in the euro zone's bailout fund, a day after European officials rejected its request.

Athens had appealed for the European Financial Stability Facility to return 1.2 billion euros it said it had overpaid when it transferred bonds intended for bank recapitalisation back to the Luxembourg-based fund this month.

But euro zone officials agreed on Wednesday that Greece was not legally entitled to the money, dashing Athens's hopes for a quick cash payment it needs to help avert potential bankruptcy as early as next month.

In a statement on Thursday, the chief executive of the Hellenic Financial Stability Fund (HFSF), Anastasia Sakellariou, defended Athens's claim.

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Data show how Greek bank run loomed before bailout extension deal

by Peter Spiegel

Financial Times
March 26, 2015

Greek companies and households pulled €7.6bn out of their bank accounts during the government’s standoff with its international bailout creditors in February, driving deposits down to €140.5bn — the lowest level in 10 years.

Although the withdrawals were lower than in January, the €20.4bn pulled out over the two months shows how close Greece came to a full-scale bank run before Athens reached agreement with eurozone authorities to extend its €172bn bailout into June.

The two-month total, reported by the Bank of Greece on Thursday, is even larger than the €15.9bn withdrawn by companies and households in May and June 2012, when back-to-back Greek elections led eurozone officials to prepare actively for a Greek exit from the single currency.

Originally, Greece’s EU rescue programme was due to expire at the end of February. Repeated failures by the new Greek government to reach agreement with eurozone creditors led to a rapid speeding up of capital flight. Officials said that in the days before an extension deal was reached, almost €800m was being withdrawn from Greek banks every day.

Jeroen Dijsselbloem, the Dutch finance minister who led eurozone negotiations with Athens, told the Financial Times last month that the massive withdrawals were the primary force pushing the Greek government towards an extension deal.

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Charting Greece's Draining Coffers

by Mark Gilbert

Bloomberg
March 26, 2015

When Dutch Finance Minister Jeroen Dijsselbloem raised the possibility that Greece might need to impose capital controls in a radio interview last week, it seemed like a crazy indiscretion. Why would a senior member of the euro establishment effectively tell people "Hey, we're considering locking your money inside the country, so you might want to get your euros out while you still can," and risk accelerating outflows from the country's already enfeebled banking system?

And when the European Central bank decided yesterday to grant more than 1 billion euros ($1.1 billion) of extra funds to Greece's banks, it was hard to divine the motivation for the altruism. Was it a carrot to incentivize the government to get serious about meeting the demands of its creditors? Or was it an emergency infusion, acknowledging that Greece is fast running out of money as well as time?

The following chart, based on data just released by the Bank of Greece, hints strongly at the latter explanation:

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How Greece’s Exit From Euro Could Happen

by Nikos Chrysoloras & James Hertling

Bloomberg
March 26, 2015

With the fight to keep Greece in the euro now in its sixth year, everyone is running out of patience. More importantly, Prime Minister Alexis Tsipras’s government in Athens is running out of money.

While bond yields suggest investors expect Greece to stay in the euro, economists such as UniCredit Bank AG’s Erik Nielsen say it may be just a matter of time before he’s forced to print a new currency.

Adopting the euro was always supposed to be a one-way ticket, so there is no legal precedent or political roadmap for an exit. If you’re waiting for a formal announcement of a clear resolution, you may be waiting a long time.

Next steps for Greece range from retaining the euro to catastrophic divorce; half-measures like having multiple currencies circulate, with aid recycled to repay foreign-currency debts, are also in the cards.

Equally unclear is who would tell the world -- and how -- that Greece has entered an economic afterlife. Possible messengers include Tsipras, the European Central Bank, European Union President Donald Tusk and European Commission President Jean-Claude Juncker, among others.

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What Alexis Tsipras Must Do to Keep Greece in the Eurozone

by Simon Nixon

Wall Street Journal
March 25, 2015

In the next few days, it will become clear whether there is any realistic prospect of Greece remaining within the eurozone.

After two wasted months, Prime Minister Alexis Tsipras appears finally to have conceded that his quest for blank checks was futile. At two crisis meetings over the past week, German Chancellor Angela Merkel and other eurozone leaders explained again why: The eurozone is an association of 19 sovereign states governed by rules. Those rules state that Greece can’t receive aid unless it complies with conditions—and the most important condition is that it does whatever is necessary to restore its capability to fund itself on the financial markets.

As European Central Bank President Mario Draghi has regularly pointed out, the eurozone simply can’t work on the basis of permanent creditors and permanent debtors. National parliaments will never agree to a system of permanent transfers: Each country must strive to stand on its own two feet.

Mr. Tsipras says that Greece’s bailout program failed. But the goal of the program wasn’t to guarantee Greek citizens a certain standard of living: It was to restore Greece’s market access. On this basis, the program was succeeding: The Greek government was last year able to issue bonds and Greek banks were able to issue shares.

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ECB Lifts Ceiling on Greek Emergency Loans

Wall Street Journal
March 25, 2015

The European Central Bank on Wednesday increased the amount of money Greek banks can borrow under an emergency lending program, extending a lifeline for the country’s banks as its government continues tense negotiations with its creditors over its bailout program.

The ECB raised the amount the Greek central bank can lend its banks to €71.1 billion ($77.8 billion) from €69.8 billion the previous week, according to a Greek bank official. Under the emergency-liquidity assistance program, or ELA, the Greek central bank lends money to its country’s financial institutions. The loans carry a higher interest rate than standard ECB loans, and the credit risk stays with Greece.

The ECB declined to comment.

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Missteps and miscalculations that could cost Greece the euro

by Mohamed El-Erian

Financial Times
March 25, 2015

Despite having lots of the economic logic on their side, the newly-elected Greek government is slipping further behind in its goal of restoring economic dynamism, jobs and financial viability. As a result, both Greece and its European partners risk losing control of the one thing they seem to unanimously agree on — namely, maintaining the country within the eurozone. Understanding the five main reasons why this is happening also sheds light on what needs to be done.

The new government led by the leftwing Syriza party was elected with a manifesto that contains three policy changes that many economists agree on: reducing excessive austerity, revamping structural reforms to unleash broader economic dynamism, and removing crippling debt overhangs that undermine existing productive activities and discourage the stimulus that comes with new investments.

But in translating intentions into actions, Greek officials with little or no governing experience have mishandled five issues that now risk eroding their credibility. First, they opted to negotiate with their European partners, and Germany in particular, in an overly public and confrontational manner.

Second, angered by European intransigence, they ended up politicising what should have been the technocratic work of specialist economic negotiators. Any chance of reaching an understanding was undermined by competing political narratives and noisy nationalistic accusations. In such an environment, good economics had no chance to prevail.

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Euro Area Said to Give Greece Five Days to Deliver Plan

Bloomberg
March 25, 2015

Greece has until Monday to show how it will follow through on reform commitments after the euro area ruled out speedy access to aid funds, three officials said following a conference call of finance ministry deputies.

The euro zone’s other 18 members were adamant on Wednesday’s call that Greece needs to deliver specific plans to see any more bailout cash, the officials said. Prime Minister Alexis Tsipras needs to show that Greece can rebuild trust in its promises, they said.

Finance deputies left the door open to 1.2 billion euros ($1.3 billion) that has been allocated to aid the banking system, as the deputies concluded that Greece can’t tap those funds on a technicality. As a result, Greece will have to show it will move ahead with the changes its creditors are seeking to get the bank-aid money or other bailout funds.

Greece won some financial breathing room Wednesday when the European Central Bank raised the ceiling for Emergency Liquidity Assistance to Greek banks by more than 1 billion euros to more than 71 billion euros, according to two people with knowledge of the decision who asked not to be named.

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Angela Merkel steps in to calm tension with Greece

Economist
March 25, 2015

The meeting between the German chancellor, Angela Merkel, and the Greek prime minister, Alexis Tsipras, in Berlin on March 23rd marked an important step in improving dialogue between the two countries. In the past few weeks many in Greece and Germany, including the two countries' finance ministers, have traded verbal blows, threatening to cause a serious breakdown in relations. In this context, the meeting between Ms Merkel and Mr Tsipras appears to have been successful. However, discussions are reported to have focused on the situation in Greece and the country's relationship with the EU, rather than the details of the reform programme that Athens must submit to its creditors by March 30th. Ms Merkel will try to find a compromise acceptable to both Greece and its creditors, but her position is constrained by public opinion that is increasingly hostile to Greece. As a result, compromise will have to come mainly from the Greek side—and this looks a daunting task for Mr Tsipras and his administration given their promises to voters before the election on January 25th. Our core view is that Greece will remain in the euro, but solutions will continue to be piecemeal, short-term and last minute in nature.

Ms Merkel and Mr Tsipras met for almost five hours in Berlin on March 23rd. According to media reports, this was a general conversation about the economic situation in Greece and its relationship with the EU. Following the meeting, Ms Merkel struck a relatively positive and conciliatory tone. She emphasised that she wants good relations with Greece, and promised to support measures geared towards helping the Greek economy to recover.

However, Ms Merkel was also keen to spell out what she considers to be non-negotiable, particularly in relation to Athens sticking to previous reform commitments agreed with its creditors. Moreover, Ms Merkel stressed that she was not in a position to promise fresh liquidity to Greece (something which has been mentioned by the Greek side in recent days, although not—at least officially—at this meeting), noting that any decision relating to the availability of short-term funds to Greece must be taken by the country's creditors, after an assessment by the "troika" of the European Commission, the IMF and the European Central Bank (ECB). These statements reflect Ms Merkel's long-standing approach to the management of the euro zone crisis (and indeed other issues, such as the Ukraine conflict): sticking to a clear, rules-based system and breaking down problems into distinct segments to be dealt with separately.

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Greek hopes to tap €1.2bn from EU fund dashed

by Peter Spiegel

Financial Times
March 25, 2015

Athens’ hope that it could alleviate a mounting cash crisis by seeking the return of €1.2bn in disputed funds from its bank rescue were dashed when the government was informed it had no legal claim on the money.

The funds were part of an original €48.2bn in bonds injected by eurozone creditors into a fund to recapitalise Greece’s stricken banks in 2012. Some €10.9bn was left unused, of which €1.2bn was in cash.

The Greek government believes the funds were sent back to eurozone authorities in error last month when, under pressure from Germany, finance ministers agreed all the remaining money in the bank rescue facility should be returned to the eurozone’s bailout fund.

But on a conference call between deputy ministers from all 19 eurozone finance ministries, the Greek delegation was told on Wednesday that the €1.2bn was correctly returned and the cash would stay in the bailout fund, known as the European Financial Stability Facility.

“There was agreement that, legally, there was no overpayment from the [Greek bank recapitalisation fund] to the EFSF,” said an EFSF spokesman.

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Sustaining the Unsustainable Eurozone

by Yannos Papantoniou

Project Syndicate
March 25, 2015

When the eurozone was established, its creators envisioned gradual progress toward an “optimal currency area,” characterized by fiscal integration, the free movement of labor, and political union. But this process has not occurred, and, as the interminable Greek crisis has shown, the eurozone remains rife with structural weaknesses and extremely vulnerable to internal shocks. This is clearly not sustainable.

Despite efforts to promote fiscal-policy coordination, eurozone members’ budgets still fall under the purview of separate national authorities, and northern Europeans continue to oppose transfers from more to less prosperous countries beyond the very limited allowance of the European Union’s regional funds. Moreover, labor mobility is severely constrained by linguistic and cultural barriers, as well as administrative bottlenecks. And “ever-closer” political union has ceased to attract public support – if it ever did – and is thus not feasible today.

A growing number of commentators – and no longer only in the Anglo-Saxon world – question the monetary union’s viability. Some encourage Greece to exit the eurozone, believing that a more restricted and homogeneous currency union would be stronger and easier to unite. Others consider a Greek exit to be just the start of the inevitable unraveling of a scheme that does not serve the purpose for which it was created.

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Deescalating Europe’s Politics of Resentment

by Yanis Varoufakis

Project Syndicate
March 25, 2015

A German television presenter recently broadcast an edited video of me, before I was Greece’s finance minister, giving his country the middle-finger salute. The fallout has shown the potential impact of an alleged gesture, especially in troubled times. Indeed, the kerfuffle sparked by the broadcast would not have happened before the 2008 financial crisis, which exposed the flaws in Europe’s monetary union and turned proud countries against one another.

When, in early 2010, Greece’s government could no longer service its debts to French, German, and Greek banks, I campaigned against its quest for an enormous new loan from Europe’s taxpayers to pay off those debts. I gave three reasons.

First, the new loans did not represent a bailout for Greece so much as a cynical transfer of private losses from the banks’ books onto the shoulders of Greece’s most vulnerable citizens. How many of Europe’s taxpayers, who have footed the bill for these loans, know that more than 90% of the €240 billion ($260 billion) that Greece borrowed went to financial institutions, not to the Greek state or its people?

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A Greek Surprise

Wall Street Journal
Editorial
March 24, 2015

When Greece’s government struck a deal with creditors last month to extend its bailout, we warned that the next Greek crisis would come when that four-month agreement ran out and Athens’s failure to reform triggered a new crunch. Turns out we were optimistic. It took Greece barely four weeks to roll back to the cliff.

Athens could run out of cash in mid-April, as tax revenues plummet and creditors withhold the last €7.2 billion in financing under the current bailout. Should Athens somehow avoid defaulting on a repayment due to the International Monetary Fund and a rollover of treasury bills next month, it still would need a third bailout after June since the government has scared off the private investors who might have bought Greek debt. Release of the last of the current bailout, the conclusion of a new deal, and private financing all look less likely the longer the Syriza party remains in power.

That’s because in the four weeks since last month’s deal, Prime Minister Alexis Tsipras has failed to deliver his promised reform agenda. Athens also backtracked on a central commitment of the February deal—a pledge not to implement major fiscal policies without consulting creditors—by unilaterally legislating food stamps and free electricity for low-income Greeks.

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Athens raids public health coffers in hunt for cash

Financial Times
March 24, 2015

Greece’s government has raided the coffers of its public health service and the Athens metro as it widens a hunt for funds to keep itself afloat and service debts.

Athens faces a €1.7bn bill for wages and pensions at the end of the month and then a €450m loan payment to the International Monetary Fund on April 9. Greek government and eurozone officials believe Athens does not have funds to cover both.

In another constraint on Greece’s ability to raise cash, the European Central Bank decided to impose stricter curbs on the issuance of short-term government debt.

EU officials expressed hope that a marathon Monday night meeting between Alexis Tsipras, the Greek prime minister, and his German counterpart, chancellor Angela Merkel, would spark long-stalled talks over economic reforms Greece must implement to unlock €7.2bn in frozen bailout aid.

Athens has promised to deliver a list of reforms to eurozone authorities by Monday. But officials cautioned that the list would still have to be agreed with bailout inspectors before eurozone authorities could make progress on any deal to free up new funding.

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Greece’s Unhappy Marriage

by James Angelos

New York Times
March 24, 2015

On Wednesday, Greece will mark its independence day as it does every year. Schoolgirls in embroidered traditional dresses will march alongside boys wearing fezzes and kilt-like fustanellas — outfits worn by the Greek mountain brigands who launched a rebellion against the Ottoman Empire 194 years ago. Children will perform plays and recite poems emphasizing the injustices suffered by Greek Christians during the centuries-long Turkokratia, or Turkish domination.

These days, many Greeks see themselves fighting against a new foreign domination: that imposed by the country’s emergency creditors — the European Commission, the European Central Bank and the International Monetary Fund — known collectively as the “troika.” Independence day has therefore become a moment to reflect on what many in Greece call the “economic occupation” of their country.

During last year’s celebration, Greece’s then president, Karolos Papoulias, who is 85 and fought in the resistance during World War II, declared on national television: “Today our people are battling and struggling to break the stranglehold of the creditors. Our history guarantees that we will also be victorious in this fight.”

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Greece to present reforms package by Monday

Reuters
March 24, 2015

Greece will present its proposed package of reforms to its euro zone partners by next Monday in hopes they will release much needed cash, its government spokesman said on Tuesday.

"It will be done at the latest by Monday," government spokesman Gabriel Sakellaridis told Mega TV.

Greek Prime Minister Alexis Tsipras met with German Chancellor Angela Merkel in Berlin on Monday but it was unclearif they had narrowed differences on economic reforms Athens must implement to win urgently to get fresh aid from its creditors.

Sakellaridis said the package of reforms Athens will propose will not contain recessionary measures but structural changes.

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Alexis Tsipras and Angela Merkel Attempt to Bridge Differences

Wall Street Journal
March 23, 2015

The leaders of Germany and Greece sought to use their first bilateral meeting on Monday to defuse political tensions that have threatened negotiations over how to keep Greece afloat.

German Chancellor Angela Merkel and Greek Prime Minister Alexis Tsipras pledged to work together to help resolve Greece’s financing crisis, dialing down the heated tone that relations between Athens and Berlin have taken on since the new left-wing government took power in Athens.

Still, the two leaders appeared to make little progress on substance during the Greek premier’s closely watched visit to Berlin. Mr. Tsipras insisted there was a political solution to the dispute that has pitted his government against its eurozone partners over the terms of Greece’s bailout. Ms. Merkel, meanwhile, repeated her mantra that the issue was for the region’s finance ministers to discuss in separate talks.

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Soros Says Greece Is Now ‘Lose-Lose Game’ After Being Mishandled

Bloomberg
March 24, 2015

The chances of Greece leaving the euro area are now 50-50 and the country could go “down the drain,” billionaire investor George Soros said.

“It’s now a lose-lose game and the best that can happen is actually muddling through,” Soros, 84, said in a Bloomberg Television interview due to air Tuesday. “Greece is a long-festering problem that was mishandled from the beginning by all parties.”

Greek Prime Minister Alexis Tsipras’s government needs to persuade its creditors to sign off on a package of economic measures to free up long-withheld aid payments that will keep the country afloat. Since his January election victory, the leader has tried to shape an alternative to the austerity program set out in the nation’s bailout agreement, spurring concern that it may be forced out of the euro.

The negotiations between Tsipras’s Syriza government and the institutions helping finance the Greek economy -- the European Commission, European Central Bank and International Monetary Fund -- could result in a “breakdown,” leading to the country leaving the common currency area, Soros said in the interview at his London home.

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5 Takeaways From Angela Merkel’s Meeting With Alexis Tsipras

by Marcus Walker

Wall Street Journal
March 23, 2015

German Chancellor Angela Merkel hosted Greek Prime Minister Alexis Tsipras at the leaders’ first bilateral summit on Monday, against a backdrop of open antipathy between the two nations’ politicians, media and publics. The purpose of the meeting was partly to defuse the tensions and prevent public acrimony from impeding the search for a way to keep Greece financially liquid and inside the euro. Here’s what the two leaders sought to convey on Monday, and the challenge that still faces them.

1. Personal Chemistry

Both leaders are calm, level-headed politicians. They’re unlikely to fall out and complain about each other like their finance ministers, the irascible Wolfgang Schäuble and the mercurial Yanis Varoufakis. But cool temperaments can’t hide a political gulf. The differences between Ms. Merkel and Mr. Tsipras remain vast as their joint press conference made clear. From war reparations to the conditions of Greece’s bailout funding, disagreements between Athens and Berlin haven’t been this big since the debt crisis began over five years ago.

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Merkel and Tsipras in bid to defuse tensions as cash fears rise

Financial Times
March 23, 2015

Angela Merkel, German chancellor, and Alexis Tsipras, Greek prime minister, pledged to work together on Monday to try to resolve the Greek financial crisis, striking a conciliatory note during their high-profile Berlin summit.

But both said that the meeting, which Ms Merkel arranged last week in a bid to defuse escalating tensions, was not the place for detailed talks over the eurozone’s Greek rescue programme.

Having spent an hour together before the press conference, the two leaders then talked for four hours more over dinner before Ms Tsipras left Ms Merkel’s chancellery just before midnight. Ms Merkel’s spokesman said the meeting was “good and constructive” but gave no details.

On Tuesday, Mr Tsipras was due to meet foreign minister Frank-Walter Steinmeier and German opposition leaders, including chiefs of the far-left Linke party which has backed his radical policies.

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Q&A: As Greece and creditors squabble, cash is running out

by Peter Spiegel

Financial Times
March 23, 2015

It does not get much simpler than this: the Greek government is rapidly running out of money and the EU authorities that could provide the cash to bail it out are refusing to do so.

That is at the heart of the two-month stand-off between Athens and its eurozone creditors and the main complaint contained in a five-page letter sent a week ago by Alexis Tsipras, the Greek prime minister, to his German counterpart, chancellor Angela Merkel, whom he met in Berlin on Monday evening.

There are only two sources of cash Greece can tap: the €7.2bn remaining in its current bailout or by issuing short-term debt that is then purchased by Greek banks. But eurozone authorities are refusing to allow either until Athens implements sweeping economic reforms, which Greek authorities have been resisting. Neither side is budging.

When will Greece run out of money?

That’s the €7.2bn question, and nobody knows the precise answer since national treasuries always seem to find ways to shift cash around — and Athens has thus far been pretty good at scraping together funds from bank accounts held by independent government agencies.

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Greeks Investigate Statistics Chief Over Deficit Figure

by Nektaria Stamouli & Stelios Bouras

Wall Street Journal
March 22, 2015

Greek authorities are escalating a criminal investigation against the head of the official statistics service, accused by some politicians of inflating the budget deficit to help Greece’s creditors justify the country’s unpopular bailout terms.

The country’s chief statistician, Andreas Georgiou, was summoned to testify to prosecutors late last week and faces further questioning on Monday, according to people familiar with the proceedings. The move reactivates a prosecution that was thought to be dormant and indicates that the case is likely headed for a trial, these people say.

The revival of the case comes as Greece’s new government—a coalition of the radical-left Syriza party and the right-wing nationalist Independent Greeks—seeks to challenge the tough austerity and free-market overhauls imposed by Greece’s main lenders: the rest of the eurozone and the International Monetary Fund.

The renewed pressure on Mr. Georgiou is likely to add to the acrimony between Athens and its European and IMF creditors, which demanded a politically independent statistics service as part of Greece’s overhauls under the bailout.

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In Greece, Syriza Struggles to Deliver Promises as Money Runs Out

by Jim Yardley

New York Times
March 22, 2015

Glowering with disdain, Evangelos Venizelos stepped into the well of the Greek Parliament and ridiculed members of the country’s new leftist government. They had vowed to roll back unpopular austerity measures that Mr. Venizelos and the prior government had pushed through. They had promised that Greece would stop kneeling to European creditors.

Mr. Venizelos, once a powerful minister given the task of defending austerity, offered a disgusted opinion: Who are you kidding?

“You were grossly unprepared and naïve,” Mr. Venizelos boomed during last Friday’s debate over a government amnesty program to collect unpaid taxes. He added: “The government is fooling itself by using double talk. They are saying one thing in the country and another thing to the lenders.”

Having promised an anti-austerity revolution, Prime Minister Alexis Tsipras and his Syriza party are now having a taste of comeuppance. Even as Syriza leaders say their program remains on track, the party is struggling to transition from rebel outsiders plotting to wrest Greek’s economic sovereignty back from Berlin and Brussels to running a government that is rapidly running out of money.

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Greece’s leader warns Merkel of ‘impossible’ debt payments

by Peter Spiegel

Financial Times
March 22, 2015

Alexis Tsipras, the Greek prime minister, has warned Angela Merkel that it will be “impossible” for Athens to service its debt obligations due in the coming weeks if the EU fails to distribute any short-term financial assistance to the country.

The warning, contained in a letter sent by Mr Tsipras to the German chancellor and obtained by the Financial Times, comes as concerns mount that Athens will struggle to make pension and wage payments at the end of this month and could run out of cash before the end of April.

The letter, dated March 15, came just before Ms Merkel agreed to meet Mr Tsipras on the sidelines of an EU summit last Thursday and invited him for a one-on-one session in Berlin, scheduled for Monday evening.

In the letter, Mr Tsipras warns that his government will be forced to choose between paying off loans, owed primarily to the International Monetary Fund, or continue social spending. He blames European Central Bank limits on Greece’s ability to issue short-term debt as well as eurozone bailout authorities’ refusal to disburse any aid before Athens adopts a new round of economic reforms.

“Given that Greece has no access to money markets, and also in view of the ‘spikes’ in our debt repayment obligations during the spring and summer . . . it ought to be clear that the ECB’s special restrictions when combined with disbursement delays would make it impossible for any government to service its debt,” Mr Tsipras wrote.

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Read the annotated text of the letter

Only Technocrats Can Save Greece Now

by Yannis Palaiologos

Wall Street Journal
March 22, 2015

On Monday in Berlin, Greece’s prime minister, Alexis Tsipras, will have his first meaningful bilateral meeting with Germany’s chancellor, Angela Merkel. The omens are not encouraging.

Video emerged last week of Greece’s current Finance Minister, Yanis Varoufakis, raising his middle finger at Germany during a speech in 2013. Greece’s demands for World War II reparations from Germany, among other provocations, seem to have turned the German public decisively in favor of a divorce. In a YouGov poll last week, 59% of Germans said they would prefer that Greece leave the eurozone, up from 48% a month earlier.

After the miniature summit in Brussels in the early hours of Friday in which they both participated, Mr. Tsipras and Mrs. Merkel seemed to emerge with very different understandings of what they had agreed to. The same divergence of interpretation has plagued Greece’s Feb. 20 agreement to extend its bailout by four months.

This is no accident. The new government in Athens is trapped between its pre-election promises to voters and the demands of its creditors. Under the specter of a shutdown of the banks and the imposition of capital controls, Mr. Varoufakis signed on to the February deal, which left the bailout infrastructure essentially in place if under different names. (The troika of the European Central Bank, European Commission and the International Monetary Fund became the “institutions,” the new program to be agreed by June would be a “contract,” and so on.)

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No cash for Athens until reforms in place, says Spain

Financial Times
March 22, 2015

Greece’s cash-starved government will not receive any money from the eurozone rescue fund until all its proposed reforms have been implemented, the Spanish economy minister has said.

“We will see whether the list of reforms is comprehensive enough or not. [But] there will not be any disbursement before there is a real test that the reforms have been approved and implemented. That is the approach,” Luis de Guindos said in an interview with the Financial Times, dashing Greek hopes that the presentation of a new reform list alone could unlock fresh funds for Athens.

Madrid has taken a particularly hardline stance on Greece’s radical anti-austerity push, but patience is running thin in other eurozone capitals, not least Berlin where Chancellor Angela Merkel will meet Greek premier Alexis Tsipras on Monday.

“We have been losing time, and the communications from the Greek side have not been brilliant. They have not made a lot of friends,” Mr de Guindos said, adding that European governments were united in their stance on Greece: “There is no sign of divisions — not at all. And that is despite the fact that the Greeks have tried to exploit potential divergences. But those divergences don’t exist.”

The minister, who is one of the frontrunners to take over the presidency of the eurogroup of eurozone finance ministers this year, said Greece should push through a “real privatisation program” and refrain from “unilateral measures” such as last week’s anti-poverty law.

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Merkel sets strict terms for Greek aid, Juncker flags EU cash

Reuters
March 20, 2015

European Union leaders welcomed a pledge on Friday from Greece to meet creditors' demands for a broad package of economic reform proposals within days to unlock the cash Athens needs to avoid stumbling out of the euro zone.

After overnight crisis talks on the sidelines of an EU summit in Brussels, new Greek Prime Minister Alexis Tsipras and German Chancellor Angela Merkel, the bloc's main paymaster, offered somewhat divergent understandings of how much Athens must do and how quickly. But EU officials insisted there was a broad agreement to act now on an accord struck a month ago.

Merkel said Greece, which faces a cash crunch within weeks, would receive fresh funds only once its creditors approve the comprehensive list of reforms Tsipras promised to present soon.

But she signalled some flexibility on what reforms Tsipras would have to make -- crucially giving his leftist-led coalition the chance to offer alternative savings strategies that will help it persuade its voters it is breaking with what Tsipras calls the failed austerity policies of his defeated predecessor.

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Greece, creditors hobble on amid low hopes for a bailout

by Alexandra Mayer-Hohdahl

German Press Agency
March 20, 2015

When Greek Prime Minister Alexis Tsipras first sat down with top European officials in the middle of the night on Thursday to discuss his country's economic woes, the atmosphere appeared almost light-hearted.

German Chancellor Angela Merkel was filmed merrily chatting with Eurogroup chief Jeroen Dijsselbloem, while European Commission President Jean-Claude Juncker laughed at a comment by EU President Donald Tusk.

But diplomats say the atmosphere quickly turned serious after the cameramen were ushered out of the room. Aid negotiations with the cash-strapped country had made only halting progress and fears were spreading that Greece could run out of money and leave the eurozone.

Tsipras was seeking quick access to his country's remaining bailout funds, but EU leaders had closed ranks earlier Thursday with a demand that Athens deliver reforms before any more cash could flow.

"This was not a meeting to take decisions but to have a reality check," Tusk said Friday. "This was an important meeting in which we managed to rebuild trust. It is now up to all of us, not least Greece, to live up to that."

"There was criticism of how [EU] officials were treated in Athens. These were frank words," one source said on condition of anonymity.

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The Greece Issue Breeds Brinkmanship in the Eurozone

New York Times
Editorial
March 20, 2015

Nobody expected that the discussions between Greece and the rest of the eurozone about a new loan agreement would go smoothly. But things seem to be going even worse than expected, with both sides sniping at each other and refusing to engage in meaningful negotiations.

Last month, Greece and its lenders — the 18 other countries that use the euro, the European Central Bank and the International Monetary Fund — agreed to extend a 240 billion euro (about $260 billion) bailout program for four months while they worked on a permanent deal. The hope was that during this time, Greece would start making changes like improving tax collection and reducing senseless regulations that make it hard to do business in the country. In exchange, Greece’s creditors would give it more leeway in how and when it paid back its loans.

But with debt repayments coming due, and fears mounting about a possible Greek default and exit from the euro, both sides seemed more eager to annoy each other than to grapple with fundamental issues. Greece’s prime minister, Alexis Tsipras, has been demanding German reparations for World War II, which seems almost beside the point. The German finance minister, Wolfgang Schäuble, has antagonized Greece with some name-calling, describing its finance minister as naïve.

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Greece’s Tsipras Gets ‘Reality Check’ at EU Summit

by Matthew Dalton

Wall Street Journal
March 20, 2015

Alexis Tsipras, the new Greek prime minister, came to Brussels on Thursday hoping to secure offers of desperately needed financial support from the currency bloc during a meeting with eurozone leaders.

What he got instead was a splash of cold water from the two people who control the eurozone’s purse strings: German Chancellor Angela Merkel and European Central Bank chief Mario Draghi. They said the eurozone won’t give Athens more money until it passes into law much of the bailout program the new Greek government signed up to late last month, according to people briefed on the meeting.

“This wasn't a meeting to make decisions, but to have a reality check,” European Council President Donald Tusk, who organized the meeting, told reporters on Friday, “and to avoid misunderstandings at the highest political level.”

The tough message renews pressure on Mr. Tsipras to execute a dramatic turnaround in talks on a revised bailout program at a time when clashes between his government and the eurozone are flaring up daily.

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Greece slides towards the euro trapdoor

Financial Times
Editorial

March 20, 2015

If there is one thing all sides in the Greek crisis publicly agree on, it is that Greece should stay in the eurozone. Yet with every day that passes without the Greek authorities and their creditors even finding a common basis for discussion, that exit creeps ever nearer.

The leaders met this week at an EU summit, again without agreement on how Greece can implement reforms that unlock lending from the troika of the eurogroup of finance ministers, the International Monetary Fund and the European Central Bank. What is becoming ever clearer is that, whatever the faults of the creditors, the Greek authorities are proving themselves to be unreliable negotiating partners.

Since the Syriza government was elected in January, the contours of a deal have been clear. In return for structural changes to release suppressed potential in the Greek economy, the troika will first relax primary fiscal deficit targets to encourage growth and then discuss a writedown of the overhanging debt stock. In the few months that it will take to negotiate this, the ECB will keep the Greek banking system afloat by permitting the Greek central bank to supply liquidity.

The problem is that nearly two months after Syriza took office, negotiators are barely any closer to a solution. Yanis Varoufakis, Greece’s finance minister, has proved himself an excellent self-publicist but not a reliable interlocutor. Some of the list of proposed reforms he produced to push the talks forward two weeks ago, including a proposal to wire up tourists as undercover tax inspectors to hunt for VAT fraud, have bordered on the eccentric. It is little surprise that his eurozone counterparts are often forced to bypass him and deal directly with Alexis Tsipras, the prime minister.

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Bond Markets Bet on Grexit

by Mark Gilbert

Bloomberg
March 20, 2015

Two taboos about Greece's future as a member of the euro club were broken this week when the German finance minister all but invited Greece to return to the drachma and the Dutch finance minister floated a temporary ban on Greeks' taking their money out of the country.

Suggestions that some German officials are less than enthusiastic about Greece remaining in the euro and that capital controls are possible aren't all that surprising. Nevertheless, the openness with which they were discussed shows the lack of progress the newly elected government has made in reaching agreement with the nation's creditors. Greece's financial future looks increasingly perilous.

The bond vigilantes are giving Greece a huge vote of no confidence, doubling the country's 10-year yield in the past six months and driving its three-year borrowing cost to a frankly unsustainable 23 percent. At that level, investors are signaling genuine concern that the country won't be able to pay its debts and can't retain its membership in the single-currency club:

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It Really Looks Like Greeks Are Hiding Cash Under the Mattress

Bloomberg
March 20, 2015

It is no secret that banks in Greece have been losing deposits in recent months.

The question that is somewhat open, though, is where Greeks have been moving their deposits to. Have they been transferring the cash to other banks, or have they been squirreling it away under the mattress—and under bathroom tiles?

At first glance, data from the Bank of Greece seem to point to the deposit transfer option rather than the cash-under-mattress option as the "banknotes in circulation" line item on its balance sheet hasn't shown any big spike in recent months.

This, however, does not tell the full story.

The banknotes in circulation item on the Bank of Greece balance sheet only shows the amount of cash Greece has been allocated under its share of overall euro-area banknote circulation. Any extra cash needs of the Greek economy are accounted for elsewhere on the Bank of Greece balance sheet under the rather drab headline of "net liabilities related to the allocation of euro banknotes within the Eurosystem."

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Greece’s Tsipras vows to accelerate reforms at meeting with EU creditors

Financial Times
March 20, 2015

Greece’s prime minister agreed to speed up his economic reform plans but failed to secure any short-term financing for his cash-strapped government at a meeting with German and French counterparts and EU leaders late on the sidelines of a summit in Brussels.

The agreement with Alexis Tsipras did not change the terms of a deal reached a month ago with eurozone finance ministers, which has floundered amid Greek objections to detailed talks with bailout monitors in Athens.

Nor did it bring Athens any closer to securing some of the €7.2bn remaining in the bailout, despite mounting evidence it is running so low on funds that it has had to scrape together cash from the bank accounts of independent government agencies.

But EU leaders said they hoped the three-hour discussion at the highest level would provide the needed spark for Greek authorities to co-operate more fully with the fact-finding team in Athens, which must sign off on a final list of reforms that Mr Tsipras vowed to present in a matter of days. Only when the list is agreed and the reforms implemented will bailout cash be released.

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