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01 March 2015

Financial Times: How Jeroen Dijsselbloem did the deal to extend the Greece bailout

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When Jeroen Dijsselbloem finally received the letter from Athens, he was more than a little surprised.

For the preceding 48 hours, the chairman of the eurogroup of finance ministers had been in talks with Alexis Tsipras, the Greek premier, about what a letter requesting a four-month extension of Athens’s €172bn bailout should contain. They had spoken repeatedly by phone, swapped drafts, offered edits.

But the letter Mr Dijsselbloem received, signed by Yanis Varoufakis, the Greek finance minister, bore no resemblance to those discussions. Key commitments, such as ensuring Greece’s budget surpluses would be big enough to gradually reduce its national debt, were now far more vague. Faced with a veto from Berlin, Mr Dijsselbloem, who is also the Dutch finance minister, phoned Athens.

“I called Tsipras and said, ‘look, I don’t know what happened, but you sent a different letter’,” Mr Dijsselbloem recalled in an interview. “And Tsipras was surprised. ‘How is this possible?’ He checked. Someone had changed it.”

Over five days of nearly endless negotiations — some in person, some over email, some by phone — the two sides finally reached a deal last Tuesday, largely on Mr Dijsselbloem’s terms. It was an agreement to extend the Greek bailout beyond its February 28 expiry date, staving off a bank run and possible national bankruptcy. In a dramatic climbdown, Athens’s new hard-left government committed to live up to the programme’s existing reform conditions, something it had long vowed never to do.

The deal marked the end of a month of whirlwind talks during which Mr Dijsselbloem and his blunt negotiating style clashed directly with Mr Varoufakis, his freewheeling and iconoclastic Greek counterpart. Even though disaster was averted, the negotiations left egos bruised on all sides, Mr Dijsselbloem made clear in his most extensive remarks on the episode to date. That suggests the next steps needed to keep Athens solvent could be even more tense and trying for Greece and its 18 eurozone partners.

Seated in his well-ordered office in the modern, airy Dutch finance ministry in The Hague, Mr Dijsselbloem made no apologies for his style, saying it was his job to “push” Mr Varoufakis. Although he acknowledged “sometimes people get angry” during such talks, he denied reports the two men nearly came to blows at one point.

“This is all rubbish,” he said. “The fact is that I had to push him towards a solution, and that’s my job. I also have to push other ministers, who are also quite tough and stubborn, towards a solution.”

Mr Dijsselbloem’s efforts began just days after the new government was elected in late January, when he made a much-criticised trip to Athens in which he and Mr Varoufakis ended up publicly sparring at a press conference over the future of Greece’s bailout. Markets tumbled.

Mr Dijsselbloem defended the decision to visit the Greek capital even before the government, led by the radical left Syriza party, had formally taken power, saying he was attempting to undo some of the damage from the election campaign.

“There were a lot of politicians from throughout Europe who were basically interfering, giving advice to the Greek electorate [on] what to vote, which I didn’t think was correct,” Mr Dijsselbloem said. “We don’t have a lot of time, we need to get working with them, and I want to send them the signal: I fully accept you as new partners; let’s get the talks started.”

Despite the rough start, Mr Dijsselbloem said the new government’s hard line began to soften as public declarations by Mr Varoufakis and other ministers that Greece was bankrupt spurred massive bank withdrawals. That, in turn, ratcheted up pressure on Athens to cut a deal quickly, he added. “That was the biggest driver.”

Last week, the Greek central bank announced deposits were withdrawn at a rate of about €400m a day in January; by late February, officials say, that rate had nearly doubled.

Still, crafting a deal proved difficult. A first eurogroup meeting to start the process broke up in acrimony. Mr Dijsselbloem tried again five days later but the ensuing bust-up proved even more spectacular: Mr Varoufakis marched out of the session accusing the Dutchman of reneging on a deal Athens had struck with Pierre Moscovici, the European Commission’s economic chief.

Mr Dijsselbloem blames the commission, which has typically been more lenient towards Greece than its other creditors, saying its intervention had short-circuited proper procedure and that he had been kept in the dark.

“The Greeks then thought they had an agreement,” Mr Dijsselbloem said. “I was not involved in that, and that’s not very smart. If you want to get an agreement with the eurogoup, it would help to inform me of what you’re trying to do.”

Instead, Mr Dijsselbloem issued his own, far tougher proposal, which quickly leaked to the press. H e put his head in his hands to mimic his reaction upon learning of the leak — presumably orchestrated by Mr Varoufakis. “I know in politics it’s all about the frame and who gets to frame first,” he said. “But if you’re in such a delicate process, trying to rebuild trust, trying to get a process going, to then . . . walk into the press room and say: ‘Oh, these guys can’t be trusted, look what they’re trying to push down our throats.’ That was just not very helpful.”

Full article on Financial Times (subscription required)

© Financial Times

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