Greek Government Gets Another Chance to Yield to European Demands

It seems that the Greek debt saga is not about to finally come to a head today and jittery investors will have to wait a while longer for the expected Grexit. This morning, the EU cancelled its planned summit of all 28 member state heads that would have made it possible to kick Greece out of the Eurozone.

Instead, European Council President Donald Tusk announced that the eurozone meeting "would last until we conclude talks on Greece." In the meeting, eurozone finance ministers debated Greece's request for another three-year loan after the Greek government supposedly agreed to long-demanded reforms. The meeting was called off for nine hours today, reportedly after the debate got too heated.

The eurozone finance ministers reportedly agreed in principle that Greece's debt burden should be eased by extending loan maturities and other measures but not on a debt write-down. The offer is conditional upon the Greek government's ability to implement key reform demands regarding taxation, pensions, labor markets and public administration.

Italian Economy Minister Pier Carlo Padoan said outside the meeting place, "The main obstacle to moving forward is a lack of trust. I would like to see the Greek government take concrete actions starting tomorrow in parliament to implement measures that are needed for Greece in the first place."

It is not at all clear as to whether the Greek government is actually able to pass such reforms tomorrow, as the ruling far-left wing party was elected on the promise of resisting all compromises with the creditors. The Greek Prime Minister appointed a new finance minister, Euclid Tsakalotos, as Yanis Varoufakis was seen as a hindrance to negotiations but there are still many in parliament who will object.

Dimitrios Papadimoulis, a Syriza member of the European Parliament, already commented on today's development saying: "What is at play here is an attempt to humiliate Greece and Greeks, or to overthrow the Tsipras government."

Malta's Prime Minister on Greece:

We need a solution but not at any cost. Key issue is trust in #Greece. #Malta against #debt haircut but favours flexibility of conditions-JM

— Joseph Muscat (@JosephMuscat_JM) July 12, 2015

Among the ranks of the other European member states there are also reservations about the new compromise. A number of more hardline members called for the implementation of a German government paper that would force Greece on a five year "time-out" from the eurozone unless it accepted and swiftly implemented much tougher conditions, including holding state assets in an independent trust and privatized for debt repayments.

Considered by the Greeks to be the most hardline on the issue, Finnish Finance Minister Alexander Stubb insisted today that his nation was “not trying to block a deal,” but rather was only demanding “very tough conditionality” before agreeing to anything.