Greek bailout scrutinized as German skepticism overshadows talks

Greek Finance Minister Euclid Tsakalotos takes part in a meeting of the Eurogroup finance ministers in Brussels on July 11, 2015.  PHOTO: AFP
Greek Finance Minister Euclid Tsakalotos takes part in a meeting of the Eurogroup finance ministers in Brussels on July 11, 2015. PHOTO: AFP

BRUSSELS (BLOOMBERG) - European officials are grilling Greece on its bailout proposals in talks to save its place in the euro as a German-led bloc questions whether they go far enough.

Hours after Greek Prime Minister Alexis Tsipras won overwhelming support in Parliament for the package of spending cuts, pension savings and tax increases, some finance ministers arriving in Brussels on Saturday voiced skepticism over the details.

Their meeting begins two days of wrangling that will conclude with a summit on Sunday, the deadline to reach a new deal.

"The Eurogroup still needs to discuss proposals and several questions are still unresolved," Estonian Finance Minister Sven Sester told reporters as he arrived for the gathering. "A strong long-term plan is needed to get the economy back on its feet."

Officials from the creditor institutions gave the proposals a cautious welcome, with International Monetary Fund chief Christine Lagarde foreseeing "a lot more progress."

German skepticism may yet overshadow that prospect: Finance Minister Wolfgang Schaeuble regards the plan as inadequate and opposes more talks, Bild reported today. A German finance ministry official said that report didn't reflect the ministry's position and that the outcome remains completely open.

"What is missing are the details," Austrian Finance Minister Hans Joerg Schelling told reporters. A guarantee is needed "that there will be an immediate implementation of the measures," he said.

In a prelude to the Brussels showdown, Mr Tsipras won a majority of 251 votes in the 300-seat parliament for his bailout proposals, but at a cost. More than a dozen members of his Syriza party refused to back the plan with some of them denouncing the harsh austerity measures it prescribes less than a week after Mr Tsipras won an anti-austerity referendum. The prime minister said after the vote that his priority would be to complete negotiations with the creditors on a bailout deal.

"The national assembly has given the government today a strong mandate to complete the negotiation and to achieve an economically viable and socially just agreement with our partners," Mr Tsipras said in a statement.

The country's three creditor institutions - the IMF, the European Commission and the European Central Bank - earlier assessed the program positively as a basis for a 74 billion-euro (S$111 billion) bailout, according to a euro-area official who spoke on condition of anonymity.

An agreement is "possible" but not certain, Tsipras told lawmakers as the debate began in the early hours of Saturday.

"The institutions have analyzed the Greek proposals and we have jointly decided that they constitute a basis for negotiating a new financial assistance program," European Commissioner Pierre Moscovici told reporters in Brussels.

Greece's international creditors still view the country's reform proposals as insufficient to meet budget surplus targets, Frankfurter Allgemeine Sonntagszeitung said, citing an assessment paper provided to euro-area finance ministers.

"Our concern has always been the hardening position of Germany and Netherlands in the negotiations," Michael Michaelides, an analyst at Royal Bank of Scotland Group Plc, wrote in a note to clients on Friday after Tsipras had presented the proposal to creditors. "A deal, whilst now more likely, is not quite nailed."