Eurogroup chief hints at ‘wriggle room ’ over Greek debt

Eurogroup chief Jeroen Dijsselbloem has indicated there is "room to manoeuvre" with Greece over its adjustment programme, but not if a new left-wing government fails to honour existing agreements with the EU/IMF.

As Sunday’s general election in Greece looms, and with it a likely victory of the bailout critical Syriza party, the Dutch euro group chief indicated its demands were not necessarily incompatible with those from its EU partners.

“There’s certain wriggle room to negotiate, to talk about the form of the adjustment programme,” he told Germany’s Spiegel Online. “But just to ask for a credit without having to meet conditions - that won’t work.”

The head of the euro group pointed out that Greece required further assistance from the euro zone, which would always be linked to conditions. But keeping Greece on a credit drip forever was not an acceptable solution either.

“We have to reach a point where the Greek economy can finance itself, and that is not easy at present,” said Mr Dijsselbloem.

Writing in Friday's Irish Times, Syriza leader Alexis Tsipras said a government lead by him would respected Greek obligations to maintain a balanced budget.

“However...austerity is not part of the European treaties; democracy and the principle of popular sovereignty are,” he wrote.

Drawing a line from Greece to Thursday’s ECB bond-buying programme, Mr Dijsselbloem said the EU required an alternative lever to monetary policy to encourage further reform in the euro area.

“If, for instance, a country gets more time to reach its budgetary targets it should always have to meet a strong and credible reform programme,” he said.

Mr Dijsselbloem said that, as with previous ECB actions, Thursday’s QE programme had bought euro leaders some time to act. Crucial now, he said, was “whether we have used this time?”

Some countries, like Ireland, Spain, Latvia and the Netherlands were enjoying growth of up to three percent after making “large reforms”.

Meanwhile countries who were not growing were the ones who had not shown enough reform ambition, he said.

With this in mind, Mr Dijsselbloem suggested the currency union required an additional reform carrot to go along with the reform stick wielded by EU institutions.

“We need to support countries that reform and, for countries that are in a bad way, we have to demand that as an additional condition,” he said, in remarks that revive a debate heard at the height of the euro crisis.

The idea of additional financial sweeteners, accessible only to reform-willing countries, was flagged in the past by chancellor Angela Merkel.

The euro group leader said different countries had different circumstances and thus different qualifying reform measures: for some it would be to liberalise the labour market, others would have to stabilise their pension system while other countries could be offered incentives to open up closed professional groups.

“Sometimes it has to do with the education or taxes,” he said. “In all cases the goal is to be more competitive.”