Greece's effort to rework bailout meets resistance in foreign capitals

Greek, German officials can't even agree on whether they 'agreed to disagree' on modifying Athens' bailout

A charm offensive by Greece's new leaders appears to have done little so far to persuade the country's skeptical creditors to modify the terms of the hated bailout that has kept its economy afloat since 2010.

Greece's far-left Syriza party was swept to power last month on promises to renegotiate the painful budget cuts and tax increases demanded by European leaders and the International Monetary Fund in return for the $274-billion lifeline.

On a tour of European capitals this week, Greek Finance Minister Yanis Varoufakis backed away from the party's pledges to negotiate a debt write-down and said he was looking to reach a compromise that would benefit Greece and its creditors.

But after a meeting in Berlin on Thursday with his German counterpart, Wolfgang Schaeuble, the two sides could not even agree on whether they had "agreed to disagree."

Schaeuble said they did. Varoufakis said they didn't get that far. "We did not reach an agreement; it was never on the cards," he said. "We didn't even agree to disagree from where I'm standing."

Time is pressing: The European portion of Greece's bailout expires at the end of February, and the government will need help to pay off billions in debt obligations due in the coming months.

Varoufakis does not want an extension of the bailout, but has proposed a bridging program until the end of May to allow time to negotiate a new deal.

Among the ideas he floated on his tour — which included stops in London, Paris, Rome and Frankfurt, Germany — are swapping some of outstanding debt for new growth-linked bonds, cracking down on corruption and going after the country's wealthy tax evaders.

Varoufakis told reporters Thursday that Greece would do everything possible to avoid default. But he said it was time to put an end to the "gross indignity" of the austerity measures that the country blames for shrinking its economy and pushing the unemployment rate to nearly 26%.

Greece's new prime minister, Alexis Tsipras, has pledged to reverse public sector layoffs, as well as painful wage, pension and welfare cuts.

Germany, which has contributed more than any other European country to Greece's bailout, has been among the most insistent that the country honor its commitments.

Schaeuble said he couldn't hide his skepticism about some of the measures announced by Greek leaders, which he said "don't necessarily go in the right direction in our opinion."

Varoufakis compared Greece's plight to that of Germany after World War I, when its economy was crippled by massive debts, helping to give rise to the Nazis.

"Germany must and can be proud that Nazism has been eradicated here, but it's one of history's most cruel ironies that Nazism is rearing its ugly head in Greece, a country which put up such a fine struggle against it," Varoufakis said. He was referring to Greece's far-right Golden Dawn party, which came third in January's elections and has 17 seats in the Parliament sworn in Thursday.

Before heading to Berlin, Varoufakis stopped in Frankfurt on Wednesday to meet with Mario Draghi, president of the European Central Bank. Hours later, it announced that it would stop lending to Greek banks using the country's junk-rated government bonds as collateral, causing investors to dump Greek stocks in Thursday trading.

But the Greek government played down the move, saying the country's banking system was protected by alternative funding sources.

"Greece cannot be blackmailed because democracy in Europe cannot be blackmailed," Tsipras said in Athens after his own tour of European capitals, including stops in Paris, Rome and Brussels.

He will have another opportunity to persuade European leaders at a meeting in Brussels on Feb 12.

European analysts expect a compromise will be reached. Without it, Greece could ultimately face bankruptcy and ejection from the Eurozone.

"There is a momentum in negotiations and talks at the moment, and when you look at it, you find that each of the negotiating parties want to reach a deal," said Nikolas Kessels, an expert on the European debt crisis at the Free University of Berlin. He suggested that Greece might be allowed more time to repay its debts.

"Such a deal will be good for Germany, who can tell its taxpayers that what they paid will be regained. The European politicians can also get back to their voters and say the same, and Greece will not have to struggle with repayments on the … shorter term."

Special correspondent Hassan reported from Berlin and Times staff writer Zavis from Los Angeles.

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