Greece’s last Eurogroup or the beginning of a new solid European Union?

It looks like Italy will be the only “serious” ally of Greece today. Photo taken from last Tuesday’s ECOFIN. From left to right: Mr Pier Carlo PADOAN, Italian Minister for Economic Affairs and Finance; Mr Yanis VAROUFAKIS, Greek Minister for Finance. (European Council TVnewsroom, 17/02/2015)

Today everyone’s eyes are fixed on the extraordinary Eurogroup meeting which is taking place in Brussels. This is simply put one of the most important gatherings in the Union’s history because one of its member states is under the “dilemma” of staying within the Eurozone by signing an extension agreement or exit and face imminent bankruptcy. This country is no other than Greece which is expected to be having both “allies” and “enemies” during this session.

The Greek government represented by the Minister of Finance Yanis Varoufakis expressed its will and need for an extension of the loan agreement or more precisely of the “Master Financial Assistance Facility Agreement”, by sending yesterday an official letter to the president of the Eurogroup, Jeroen Dijsselbloem. The latter found Greece’s request adequate to convene a meeting with the rest of the Finance Ministers of the Eurozone in order to discuss this matter more thoroughly and conclude.

Greece’s proposal

It was only yesterday that the Greek government managed to officially state (in written) its purposes and reply to the rest of the European countries that were arguing in the last EU Summit and Eurogroup that they had no clue about Greece’s intentions and what exactly they really wanted. Yanis Varoufakis wrote a very “delicate” and “well-prepared” letter to Jeroen Dijsselbloem saying among others:

“The Greek authorities are now applying for the extension of the Master Financial Assistance Facility Agreement for a period of six months from its termination during which period we shall proceed jointly, and making best use of given flexibility in the current arrangement, towards its successful conclusion and review on the basis of the proposals of, on the one hand, the Greek government and, on the other, the institutions”.

Support or NO support?

The decision of the President of the Eurogroup to convene a meeting where the Greek request will be discussed didn’t come unanswered by the German government. The German Minister of Finance, Wolfgang Schäuble rushed to reject the proposal characterising it as “trojan-horse” and inadequate since it does not secure that Greece will follow the necessary reforms.

However, the telephone call between Angela Merkel and Alexis Tsipras which lasted about an hour was enough to calm things down and reveal that both sides seek for a beneficial solution for Greece and Eurozone. Furthermore, the Minister for Economic Affairs and Energy and Vice Chancellor of Germany, Sigmar Gabriel, stated that the request of the Greek government is a step towards the right direction and triggers further negotiations.

Slovakia’s Prime Minister is in favor of a friendly “Grexit” if Greece doesn’t sign and commit to implement structural reforms. The same policy applies for Finland which is clearly supporting Schäuble’s positions.

On the other hand, the Minister of Economy and Finances of Italy, Pier Carlo Padoan, is going to vote for Greece’s stay in the Eurozone in today’s Eurogroup. It was announced by the Italian government that Mr Padoan will go to Brussels for the meeting despite the fact that there is a crucial discussion about the country’s labour reform. This shows clear understanding of the importance of the situation by the Italian government and reveals also the very good relationship between the two countries.

The second biggest economy in Europe, through its Prime Minister Manuel Carlos Valls Galfetti, said before the meeting of the 19 Finance Ministers that there is still hope and a solution is more likely to come for Greece. The statements of the European Commission and more specifically of its president Jean-Claude Juncker were similar mentioning that the Greek request was a “positive sign”.

Last but not least, the U.S. remains neutral but is pointing the finger to Athens to find a commonly agreed solution for everybody’s sake.

National parliaments the last word

The outcome of the meeting, if positive, is not the final one since it must be brought to the national parliaments, who will have to approve it. Thus, countries such as Finland and Germany have to take some time to vote for the issue of the extension of Greece’s loan agreement. This is something that must be taken into serious consideration by the representatives of each EU member state during the negotiations because time runs out on 28 February; the last day of the current bailout programme for Greece.

Grexit: a possible outcome or something that will be avoided at all costs?

“GREXIT” is not out of the question in today’s meeting but is very difficult to happen since it is not just one or two countries that decide for Greece’s fate but 18. This fact makes a negative outcome even more unlikely, because it is quite hard to imagine that common sense will not prevail in the end; even Germany should have some of that.

But even in the case that there will be no result during this Eurogroup and Greece will face a dead-end, then the last “word” will probably be said and addressed to the Greek citizens, the majority of whom don’t want an exit from the Eurozone and won’t allow their country to go bust.

All in all, Eurozone is now facing one of its most historical moments; save a member state from bankruptcy or let it exit and change the way we think of this “union”.

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