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Feb 4, 2015 5:44 PM

EU leaders caution debt deal with Greece still far off

The Associated Press

PARIS (AP) European Union leaders cautioned Wednesday that talks with Greece over its demands to ease its bailout loans will be tough, though the country's new prime minister was upbeat about a possible solution.

With all Europe waiting to see how Greece proposes to renegotiate its massive bailout loans, Prime Minister Alexis Tsipras and his finance minister are on a whirlwind tour of the region to discuss possible solutions.

Tsipras wants easier terms of repayment on the 240 billion euros (currently $271 billion) in bailout loans and to relax the austerity budget measures the country has been required to make.

"I'm very optimistic after these discussions that we are in a good way," Tsipras said, after meeting the presidents of the EU's three main institutions in Brussels. "We don't have already an agreement but we are in a good direction to find a viable agreement."

Meanwhile, Greek Finance Minister Yanis Varoufakis met with European Central Bank President Mario Draghi in Frankfurt, for what he described as "a very fruitful discussion" about the rules and constraints of monetary union.

The ECB, however, responded to the meeting by deciding late Wednesday to add pressure on the Greek government by withdrawing a key borrowing option for the country's banks.

The move underlines the key role the ECB, the monetary authority for the 19 countries that use the shared currency, is playing in the Greek drama.

The ECB had allowed the use of Greece's junk-rated bonds as collateral because the government was getting a financial lifeline though the bailout program that expires Feb. 28. The ECB said in a statement that prospects for a new deal appear uncertain.

The negotiations with leaders at the European Commission, the EU's executive and one of the three main institutions overseeing Greece's finances, are also expected to be tough.

European Commission President Jean-Claude Juncker has said the EU would show flexibility in helping Athens with its debts but ruled out wholesale policy changes.

In Berlin, German Chancellor Angela Merkel said it was too early to speculate on a deal as Greece had not yet made suggestions on how to reduce its debt load.

"We are waiting for the concrete proposals, and then we can talk further," said Merkel.

German Finance Minister Wolfgang Schaeuble will meet Varoufakis on Thursday in Berlin while Merkel could have her first meeting with Tsipras on Feb. 12, when EU leaders gather in Brussels.

Germany has long been Europe's toughest enforcer of debt reduction policies, particularly in countries like Greece that got rescue loans from fellow EU states.

After meeting with Juncker, Tsipras then headed to Paris to meet with France's Socialist president Francois Hollande, regarded as a potential ally by the Greek government in discussions with EU leaders.

Hollande called for a "long-term" solution for Greece but in a joint statement to the press he stressed the need for "respect of the European rules."

"I am sure that our partners want to listen to us and I am sure that we can work together to overcome the crisis in Greece", Tsipras said.

Tsipras is riding a wave of popular discontent in Greece over the austerity measures demanded by the creditors, which include eurozone states like Germany as well as the International Monetary Fund.

He has rejected discussing the country's debt with the so-called troika a team of technical experts representing the European Commission, European Central Bank and the IMF. Instead, his left-wing government has sought to hold talks with the leaders of those institutions and governments.

A first priority is whether Greece will ask for an extension to its loan program before a fast-approaching bailout deadline on Feb. 28. If not, Athens would be left to fend for itself without international backing.


David McHugh in Frankfurt, Germany, and Geir Moulson in Berlin contributed to this report. Lorne Cook contributed from Brussels.


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