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Greek Leaders Hit the Road Hunting For

Allies
by Jonathan Stearns and Mark Deen
10:59 PM EET February 1, 2015

New Greek Government Pitches New Debt Deal

(Bloomberg) -- Greek Prime Minister Alexis Tsipras began the hunt for allies against German demands for
austerity as his week-old government appealed to the European Central Bank not to shut off the money tap.
Tsipras traveled to Cyprus on Monday before trips to Rome, Paris and Brussels, with Berlin not yet on the
agenda. German Chancellor Angela Merkel wants to duck a direct confrontation and isolate him, a German
government official said.
The Greek leader, who issued a statement Saturday promising to abide by financial obligations, is seeking to
repair damage after a rocky start. Bond yields spiraled and bank stocks plummeted after Finance Minister
Yanis Varoufakis said the country wont take more aid under its current bailout and wants a new deal by the
end of May.
Were not going to ask for any more loans, Varoufakis said Sunday after meeting his French counterpart,
Michel Sapin. During this period, it is perfectly possible in conjunction with the ECB to establish the
liquidity provisions that are necessary.
Varoufakis was in London today, meeting Chancellor of the Exchequer George Osborne and then investors
in sessions organized by Bank of America Merrill Lynch and Deutsche Bank AG.
While euro-area officials want Greece to stick to the austerity demands of its existing bailout agreement,
Tsipras is seeking a debt writedown and an end to the committee that oversees the countrys economy.
Dismantling the troika, which comprises representatives of the European Commission, ECB and
International Monetary Fund, is timely and necessary, Tsipras told reporters in Nicosia, Cyprus.

New Stage

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Greece is in a new stage in its negotiations, on equal terms with its partners, Tsipras said after meeting
Cypriot President Nicos Anastasiades. Europe doesnt need further limitations of the necessary breathing
space for its people and economies to return to growth, to leave behind four years of ineffective choices on
all levels.
The danger is that the Greek financial system is left without funding long before the self-imposed May
deadline.
At the moment, the country has a special dispensation from the ECB because its considered to be
complying with the bailout program. That means its debt can be used in central bank refinancing operations
even though it is rated junk.
There will be no surprises if we find out that a country is below that rating and theres no longer a program
that that waiver disappears, ECB Vice President Vitor Constancio said at an event in Cambridge, England,
on Saturday.

Losing Deposits
Greek banks, which play a key role in funding the government, lost about 11 billion euros ($12.5 billion) in
deposits in January, according to four bankers who asked not to be named because the data were
preliminary. The outflow accelerated from about 4 billion euros in December. Deposits totaled 160.3 billion
euros at the end of 2014.
Merkel wants to avoid getting drawn into a direct confrontation with Tsipras and is unlikely to agree to a
face-to-face meeting with him at a Feb. 12 gathering of European Union leaders, according to a German
government official who asked not to be named because the discussions are private.
The chancellors goal is to show Tsipras that he is isolated, the official said. Whats more, she sees little
margin for maneuver on the conditions of any further support for Greece and is skeptical about Tsiprass
claims that he can raise revenue by cutting corruption and increasing taxes on the rich, the official added.

Merkel Interview
Europe will continue to show solidarity with Greece, as well as other countries particularly affected by the
crisis, if these countries undertake their own reforms and savings efforts, Merkel said in an interview with
Hamburger Abendblatt published Saturday.
Greek bonds have tumbled since Tsiprass Jan. 25 election victory. Ten-year yields posted their biggest
weekly increase since May 2012 and bank stocks tumbled last week. Markets rebounded today as 10-year
notes rose, sending the yield down 44 basis points to 10.7 percent at 1:09 p.m. in Athens.
The French government has so far offered the strongest encouragement to Greece.
Its legitimate for them to say we want to discuss how we can lower the weight of this debt, Sapin said
Sunday. We can discuss, we can postpone, we can alleviate. But we wont cancel it.
U.S. President Barack Obama weighed in, questioning further austerity. You cannot keep on squeezing
countries that are in the midst of depression, he said on CNN Sunday. When you have an economy that is

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in freefall there has to be a growth strategy and not simply an effort to squeeze more and more out of a
population that is hurting worse and worse.
To contact the reporters on this story: Jonathan Stearns in Paris at jstearns2@bloomberg.net; Mark Deen in
Paris at markdeen@bloomberg.net
To contact the editors responsible for this story: Alan Crawford at acrawford6@bloomberg.net James
Hertling, Kevin Costelloe

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