Tsipras to meet Putin over bailout loan as fears of Greek exit from EU mount

Source: http://www.theguardian.com/business/2015/jun/17/tsipras-to-meet-putin-over-bailout-loan-as-fears-of-greek-exit-from-eu-mount

Greek prime minister, who has criticised sanctions against Kremlin, will meet Russian leader amid speculation that Greece may leave both eurozone and EU

Alexis Tsipras in Athens

Alexis Tsipras in Athens. The Greek central bank has warned that the country faced ‘exit from the euro area and – most likely – from the European Union’ if a deal could not be reached. Photograph: Paul Hanna/Reuters

Alexis Tsipras will travel to Russia again on Friday to meet Vladimir Putin as questions swirl over whether Moscow could extend credit lines to bail out the Greek prime minister’s embattled economy.

Tsipras heads to Russia as fears grow that a Greek exit from both the eurozone and the European Union could be inevitable. The governor of Greece’s central bank, Yannis Stournaras, warned on Wednesday that his country was on the brink of an “uncontrollable crisis” and that failure to reach a deal would “lead initially to a Greek default and ultimately to the country’s exit from the euro area and – most likely – from the European Union”.

Tsipras will meet Putin on the sidelines of a major economic forum in St Petersburg. The Greek prime minister has been an outspoken critic of EU sanctions against Russia and is seen as one of the Kremlin’s few friends inside the European bloc. Nevertheless, sources in Brussels told news agencies on Wednesday that all 28 EU nations had agreed to roll over sanctions against Russia, which are due for renewal at a meeting on Monday.

Tsipras has criticised the sanctions on numerous occasions, and during a visit to Moscow in April hoped to secure an exemption for Greek produce from Russia’s counter-sanctions, which ban the import of fruit, vegetables and cheese from EU countries, and which have hit Greek farmers hard. On that occasion, Tsipras left Moscow with little except warm words of friendship, and analysts say it is unlikely that Putin will have much to offer immediately during this week’s visit.

“A financial deal package to Greece is definitely possible, but it’s unlikely to come as a straight bailout loan, and more likely to be packaged as part of an advance payment deal over gas transfer or something similar,” said Chris Weafer, a Moscow-based financial analyst.

The two leaders will discuss Greek participation in a major pipeline project that would bring Russian gas to Europe through Turkey and Greece, bypassing Ukraine – a long-term Russian strategic aim

Another possible outcome is that a newly founded development bank for the Brics countries – Brazil, Russia, India, China and South Africa – could ask Greece to join. Athens would pay a token amount to join the new bank and could then receive loans and funding for infrastructure projects.

Tsipras has said he will “seriously consider” Russia’s invitation to join the bank, which was clearly made with political rather than economic motives in mind.

The Greek energy minister, Panagiotis Lafazanis, told agencies last week: “We secured decisive Russian support for Greece’s request for participation in the new development bank of Brics countries.”

But the other Brics nations, which are due to meet at a summit in the Russian city of Ufa next month, may not agree to take Greece on, and analysts say Russia is unlikely to risk such a confrontational move in the immediate future.

“I wouldn’t expect Russia or the Brics bank to offer Greece loans right now; this would be seen as an aggressive move and would be likely to harden attitudes in Brussels and Berlin even further,” said Weafer.

Weafer said similar discussions had occurred over possible Russian bailouts of Iceland and Cyprus during financial crises but had come to little. “If help does come, it is likely to be after Greece has settled its issues, one way or the other, with the EU,” he said.

Russia’s economy, and its rouble currency, have been hard hit by a combination of falling oil prices and western sanctions over Ukraine, and while things have improved since December, Moscow was still not in a position to be throwing money around, said Weafer.

“The bottom line is that while access to international debt markets is still restricted, there just isn’t billions of dollars around to use for bailing out foreign countries while it may still be required to pay all the bills at home.”

Een gedachte over “Tsipras to meet Putin over bailout loan as fears of Greek exit from EU mount

  1. http://rt.com/business/257701-greece-russia-brics-invitation/

    Greece has been invited by Russia to become the sixth member of the BRICS New Development Bank (NDB). The $100 billion NDB is expected to compete with Western dominance and become one of the key lending institutions.


    The invitation was made by Russian Deputy Finance Minister Sergey Storchak on Monday during a phone conversation with Greek Prime Minister Alexis Tsipras, according to a statement on Greece’s Syriza party website. Tsipras thanked Storchak, who’s currently a representative of the BRICS Bank for the invitation, and said Greece was interested in the offer.

    “The Prime Minister thanked Storchak and said he was pleasantly surprised by the invitation for Greece to be the sixth member of the BRICS Development Bank. Tsipras said Greece is interested in the offer, and promised to thoroughly examine it. He will have a chance to discuss the invitation with the other BRICS leaders during the 2015 International Economic Forum in St. Petersburg,” the statement said.

    During the 6th BRICS summit in Fortaleza in June 2014 the members agreed to forge ahead with the $100 billion NDB, as well as a reserve currency pool worth over another $100 billion. In March this year, Russian President Vladimir Putin ratified the NDB.

    The new bank is expected to challenge the two major Western-led institutions, the World Bank and the International Monetary Fund. It will finance infrastructure projects in the BRICS countries and across other developing countries and is expected to start functioning by the end of 2015, with the headquarters in Shanghai.

    Strengthening ties
    Russia and Greece have been strengthening economic cooperation, as both countries have their own issues. While Russia is stuck in a so-called ‘sanctions war’ with the EU and the US, Greece is struggling to repay its multibillion euro debt to the troika of international lenders – the IMF, the ECB and the European Commission.

    Greece is trying to find a compromise with its international creditors to have a further €7.2 billion bailout unlocked. So far Athens has been settling its IMF repayments on time. The country started repaying €750 million in debt interest Monday, but Finance Minister Yanis Varoufakis warned Greece’s finances are “a terribly urgent issue,” and the country could default by next month if no proper measures are taken.

    Greece’s government has agreed a number of strategic deals with Russia during Prime Minister Alexis Tsipras’ visit to Moscow in April, including participation in the Turkish Stream project that’ll deliver Russian gas to Europe via Greece.

    It was rumored Russia was ready to help the Athens, but President Putin said Greece hasn’t formally asked Moscow for help. Instead of direct financial assistance Russia could help out by buying Greek state assets in privatization sales, or in other investment projects, the President said in April.

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