Running out of room

The Economist

Greece looks to China and Russia for help but cannot get around its euro zone partners

Apr 1st 2015

ALEXIS TSIPRAS, the Greek prime minister, and his radical Syriza party are beginning to feel the heat. Two months of bluster by Greece’s first left-wing government have failed to produce the results it wanted. Those include an injection of fresh cash from the country’s current €172 billion ($185 billion) bail-out programme, and a new deal with the European Union and the International Monetary Fund (IMF) that would allow Athens, not its creditors, to decide on future economic reforms.

Greece’s eurozone partners are still waiting for Athens to come up with details, promised two weeks ago, on the country’s deteriorating public finances. Mr Tsipras has promised Greek voters that Syriza has banned the hated “troika” of bail-out monitors (from the European Commission, the IMF and the European Central Bank) from Athens. To protect that political narrative, a team of mid-level officials from the three institutions sits ensconced in a four-star Athens hotel, gathering information by exchanging e-mails with their finance ministry counterparts. The ministry itself is strictly off-limits. “This system works quite well,” claims Dimitris Mardas, the budget minister. The visitors disagree, complaining about delays and inaccurate replies that could be avoided if they were allowed to meet Greek colleagues face-to-face.

Meanwhile, a three-member Greek team of senior economists in Brussels does the actual negotiating with the troika. Not much progress has been made. European officials criticised Greek revenue projections, for example, as over-optimistic. Yet officials in Athens claim that all is well and that a deal could be wrapped up as early as next week, opening the way for a cash handout of about €2 billion later this month.

Greece is getting desperately short of cash. It was a stretch last month to pay pensions and civil servants’ wages after repaying a €1.4 billion IMF loan instalment. Another €450m must be paid to the IMF on April 9th. Foreign investors must be repaid about €700m when a €1.4 billion treasury bill expires on April 14th. If both payments are made there will probably not be enough left in the government’s coffers to pay wages and pensions in April, according to officials at the central bank.

Mr Tsipras is hunting for new potential sources of financial support. One is China, which invested about €100m in two recent issues of T-bills as a token of goodwill. That gesture followed the Syriza government’s decision to revive the privatisation of the port of Piraeus, which China’s Cosco shipping group is keen to buy. Giannis Dragasakis, the deputy premier, returned from a visit to Beijing last week with a promise of more purchases of Greek T-bills by Chinese state financial institutions.

Another option is Russia. Mr Tsipras has brought forward to next week a visit to Moscow that had been set for May. In an interview with Tass, the Russian news agency, he said that Greece opposes EU sanctions against Russia, which badly hit Greek fruit exporters. He added that Greece wants to participate in Russia’s project of building a second gas pipeline across the Black Sea to Turkey. Russia’s foreign minister, Sergey Lavrov, told his visiting Greek counterpart Nikos Kotzias in February that a Greek request for a loan would be “considered”.

Yet if Mr Tsipras did pull off a deal in Moscow, Greece's European creditors would push all the harder to protect their influence. They would be more likely to keep their bail-out funds out of his reach. The Greeks may consider Russia an option, but it is one they cannot turn to without alienating the countries they ultimately need to placate: their euro zone partners.

http://www.economist.com/news/europe/21647691-greece-looks-china-and-russia-help-cannot-get-around-its-euro-zone-partners-running-out