By Jan Strupczewski
BRUSSELS (Reuters) – Damned if you do, damned if you don’t. Some euro zone countries are accusing the European Commission of giving Greece false hope of new loans for less reform effort, but they still want Brussels to find a way to keep a defiant Athens in the euro.
After four months of talks with scant progress, hawkish governments privately blame Commission President Jean-Claude Juncker and Economics Commissioner Pierre Moscovici for muddying their message by playing “good cop”.
Greece is now close to default and still resisting unpopular labor and pension reforms that are conditions for more aid.
Some governments believe the creditors would get faster results if the institutions representing them — the Commission, the European Central Bank and the International Monetary Fund — presented a more united tough front.
“In this respect, I think the European Commission plays a bad role,” a senior official from a euro zone government said.
“Some people in Athens still think they can get money without reforms, and cite Juncker, his cabinet and Moscovici as supporting their view,” the senior official said. “They think Juncker wants them to stay in the euro zone at any price.”
Those unhappy with the Commission’s negotiating tactics include Germany, Finland, the Netherlands, Austria, Latvia, Estonia, Lithuania and Slovakia, the official said. Even dovish France was “starting to be a bit annoyed”.
But no government has gone public with this criticism.
Juncker and Commission officials have insisted since talks began after the left-wing government of Alexis Tsipras won power in late January that there was no other solution than Greece remaining in the euro.
Juncker, a former chairman of euro zone finance ministers and veteran EU deal-maker, does not want the euro zone to break up on his watch, officials say.
This limits negotiating options and strengthens the hand of those in Athens gambling that the euro zone would not allow Greece to default, so if the country holds out long enough against unpopular reforms, the euro zone will blink first.
Not all euro zone governments share the Commission’s view that Greece must stay. And it is governments, in the end, that will decide what, if any, deal Greece gets since only they have money. The Commission has no funds of its own.
Juncker has defended the differentiated negotiating tactics.
“It is quite normal that the three of us have different views, but we have to make sure that at the very end Greece will be presented with a unified deal by the three institutions,” Juncker told MNI in an interview on Tuesday.
“The Greeks shouldn’t try to play on the diversity of views between the three institutions,” he said.
Euro zone governments reluctantly bailed Greece out twice before because they felt they had no other choice at the time — a Grexit in 2010 or 2012 would have badly hit all euro zone countries. Not any more, the hawks say.
With the ECB’s government bond-buying plan under way, an operational euro zone bailout fund, euro zone banks under a single supervisor after rigorous stress tests, and three of the five bailed out countries already out of their programs, many officials believe a Grexit would now cause limited political damage and have manageable economic consequences.
Portugal, Ireland and Spain, all of which had to introduce tough reforms under their own bailout programs, do not see why Greece should get better treatment then they did. Easier terms for Athens could undermine their governments’ re-election bids.
Juncker admitted that Athens may have misinterpreted his friendliness and as a result made things more difficult.
“Sometimes I get the impression that when I say time and time again that Grexit is not an option, that failure is not an option, the Greeks feel that I can prevent it,” he told MNI.
“I am not the only player. So I am openly in flavor of the Greeks but sometimes the Greeks are making the lives of their friends very difficult,” he said.
IMF “BAD COP”
With the Commission taking the soft approach, the IMF has become the “bad cop” among the three institutions. Its views are more in line with those of hardline governments. The ECB is relatively neutral, but with more inclination towards the IMF’s stance, officials said.
“It is without any doubt that the very friendly and at times nebulous and confusing communication of parts of the Commission has led the Greeks up the garden path,” a senior euro zone official involved in the negotiations said.
“They (the Greeks) genuinely believed that there was an easy way out. Again, to be fair, 90 percent of that was Greek incompetence and, on the part of a very few of the Greek actors, malevolence,” the official said.
An example of confusing negotiating tactics came in February when Moscovici prepared a draft agreement for an extension of the Greek bailout.
He showed it to Greek Finance Minister Yanis Varoufakis before a meeting of euro zone ministers that was to discuss the issue. Greece was happy to sign the Moscovici paper at once.
But on entering the ministerial meeting, Varoufakis was handed a very different text, prepared by the chairman of the meeting Jeroen Dijsselbloem. This Athens could not accept and the meeting ended in acrimony with no agreement.
The Greeks leaked the Moscovici document to the media, embarrassing the Commission, which felt its efforts to facilitate a compromise had been betrayed.
While critical of the EU executive, euro zone officials also say the IMF and the ECB do not have the carry the same political responsibility for brokering a deal as the Commission.
Finding common ground among 19 states and three institutions borders on the impossible, especially since views differ sometimes even within the same government.
“If the Commission were not trying to bridge the points of view, there would be no bridging. So if you want a total failure, ask the Commission to abstain from giving its own opinions,” Juncker said.
(Editing by Paul Taylor)