Greece braces for talks with Germany amid market relief

AP Photo/Giuseppe Lami

AP Photo/Giuseppe Lami

Greece's new anti-bailout government confirmed it will hold meetings with lead lender — and critic — Germany this week after markets and European governments reacted with relief to alternatives proposed in Athens to a hard debt write-off.

Finance Minister Yanis Varoufakis said he will travel to Germany on Wednesday to meet European Central Bank President Mario Draghi in Frankfurt and German counterpart Wolfgang Schaeuble in Berlin the following day.

Greece's left-wing Syriza party won general elections eight days ago on a pledge to ax more than half its debt to eurozone lenders.

But Varoufakis told the Financial Times newspaper that Greece was proposing alternatives included exchanging debt to bailout creditors for repayment linked to growth, as well as using interest-only “perpetual” bonds.

“We will use all the means at our disposal to reach our target, and that target is to reduce the debt … (regardless) of the name and euphemisms it is given to make it more digestible,” Varoufakis, who is on a tour of European capitals, said in Rome late Tuesday.

The news nudged investors into a buying spree.

The Athens Stock Exchange roared up 11.3 percent, leading a European rally, while Greek borrowing rates also eased.

“After a very rocky start last week, the new Greek government is faring better this week,” Berenberg Bank analyst Holger Schmieding said. “The charm offensive of the new finance minister Varoufakis seems to be paying off in financial markets.”

European Commission President Jean-Claude Juncker also appeared relieved, arguing Europe would “have to adapt a certain number of our policies” to accommodate Greece.

Germany has flatly ruled out Greek debt forgiveness. But calming tension with the new Tsipras government, German Chancellor Angela Merkel said on a visit to Singapore that there would be “sufficient opportunities” to discuss the new proposals.

In Rome, Varoufakis was joined in Rome by Greek Prime Minister Alexis Tsipras who met Italian Premier Matteo Renzi and is due to hold talks with Juncker in Brussels Wednesday.

“We didn't discuss the (new) proposals today but you will always find Italy ready to discuss them,” Renzi told a joint news conference with Tsipras.

Greece has to strike a deal with creditors by the end of June or be unable to repay about 7 billion euros ($8 billion) worth of bonds maturing in July and August.

A swift agreement, analysts argue, would also keep uncertainty from scaring off investors, hurting the already suffering economy, and inducing depositors to pull money from banks.

As things stand, Greece's banks can use their government's bonds as collateral to tap cheap ECB credit only until Feb. 28, when Greece's bailout program expires. After that, they would need to get emergency credit at higher rates from the Bank of Greece, though only with permission from the ECB.

Despite the improved atmosphere, JPMorgan Chase Bank analyst Malcom Barr cautioned that the Tsipras government and creditors still remain far apart.

“We still find it difficult,” he said, “to believe that the path toward an accommodation between Greece and the rest of the region will be at all smooth.”Alexis TsiprasbusinessBusiness & Real EstateGermanyGreece

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