Greece, EU Strike Friendlier Tone After Hopes of Quick Deal Are Dashed

Last-Minute Change of Mind Dashed Hopes of Quick Resolution to Standoff With Creditors

The Wall Street Journal

By VIKTORIA DENDRINOU And  GABRIELE STEINHAUSER

Updated Feb. 12, 2015 7:34 p.m. ET

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BRUSSELS—Leaders from Greece and the rest of the eurozone struck a conciliatory tone Thursday, a day after the country’s new government dashed hopes of a quick resolution to the standoff between Athens and its creditors.

“I think today we leave having made important steps,” Greece’s prime minister, Alexis Tsipras, said after a summit of European Union leaders in Brussels. “We didn’t cover the full distance but we covered an important part, and proved that the EU is a field of conflicts and compromises.”

The friendlier comments came after an unsuccessful meeting of eurozone finance ministers Wednesday night, in which Greece’s finance minister, Yanis Varoufakis, withdrew consent to a joint statement at the last minute—raising doubts over his country’s future in the common currency. Greece’s existing €240 billion ($242 billion) bailout from the eurozone and the International Monetary Fund expires at the end of the month and Mr. Tsipras has been under pressure to seek an extension, which could give the two sides time to reach a follow-up arrangement.

At Thursday’s news conference, Mr. Tsipras dodged the question on whether his government could request an extension of the program after all—a move that he has so far ruled out, claiming that the budget cuts and economic overhauls it entails would drive his country’s economy further into crisis.

“The bailout as we know it does not exist,” Mr. Tsipras said, also dismissing the authority of the so-called troika of the European Commission, the European Central Bank and the IMF, which has overseen the implementation of measures mandated by Greece’s rescue program.

Germany Chancellor Angela Merkel , who leads Europe’s biggest economy, said that her first meeting with Mr. Tsipras was “very friendly” and that both of them expressed a willingness to work together.

But Ms. Merkel made few concessions, saying Greece either has to request an extension for its bailout or demonstrate that the conditions attached to that program can be implemented by the end of the month.

“Those are the only two possibilities,” she said.

Earlier Thursday, Mr. Tsipras held talks with Dutch Finance Minister Jeroen Dijsselbloem, who presides over the regular meetings of his eurozone counterparts, in an effort to patch over some of Wednesday night’s disagreements. After that talk, the two agreed that technical work would begin to define “common ground” between measures mandated under the existing bailout and the plans of the new government in Athens. Mr. Tsipras said those talks would begin Friday.

That gives experts from Greece and European institutions three days to lay the foundation of a deal that leaders said had to be sealed by Monday, at the next scheduled get-together of eurozone finance ministers. Both sides are under pressure to find a solution quickly. Greek officials have said in recent weeks that the government risks running out of money in early March, especially if tax revenues decline further. On Thursday, the Greek finance ministry said its primary budget surplus—which strips out interest payments—for January fell around €900 million short of target.

Already, Greek banks, which have been hurt by an outflow of deposits due to the country’s political and financial uncertainty over the last two months, can no longer use their government’s bonds to get liquidity from the ECB, forcing lenders to instead depend on more-expensive emergency funding from their own central bank.

After the summit, Finnish Prime Minister Alexander Stubb said the agreement between Messrs. Tsipras and Dijsselbloem was a good sign. But he stressed that there was still distance between the two sides. “We’re 18 countries that have commitments—and then there’s Greece, which has demands,” he said.

Write to Andrea Thomas at andrea.thomas@wsj.com and Gabriele Steinhauser at gabriele.steinhauser@wsj.com