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Here is what we think happened in the 'missing hour' when the Greece bailout deal collapsed

Feb 12, 2015, 15:26 IST

Late last night, some people close to the economic rescue talks between European finance ministers and the Greek government thought an agreement on a framework for discussion had been reached which included a commitment that Greece repay its debts in full.

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However, the press conference that followed was delayed by over an hour, and then a clearly frustrated Jeroen Dijsselbloem told the waiting press that no such statement had been agreed and that talks would continue until Monday.

This morning rumours about what happened in that "missing hour" are swirling after the text of a purported agreement was leaked to the Financial Times. It reportedly shows an agreement between the European finance ministers and the Greek finance minister, which was then vetoed by the Greek prime minister minutes after the bargain was struck.

The statement provides a framework for discussion over resolving the current impasse between the new Greek government and its European partners over a renegotiation of the conditions of its bailout funding. The leak suggested that Athens was willing to restate its "commitment to a broader and stronger reform process...[and] their unequivocal commitment to the financial obligations to all their creditors", in exchange for "extending and successfully concluding the present programme".

Greek Prime Minister Alexis Tsipras blocked the deal, according to a Greek journalist:

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So the question is, what happened in that hour?

There are a number of competing theories, the truth of which could give us a better understanding of exactly how these negotiations are likely to play out over the next few days.

The first suggestion, pointed to by the FT's Peter Spiegel, is that there was an agreement in the meeting, and that Greek Finance Minister Yanis Varoufakis and Deputy Prime Minister Yannis Dragasakis signed off on the statement but it was later vetoed by officials in Athens just before the press conference. Such a scenario would imply that the Greek negotiating team in Brussels are not in agreement with other parts of their own government - that Varoufakis and Dragasakis are willing to offer concessions that Athens refuses to sign off on. There have long been worries that the far-left Syriza coalition may be more divided than it appears on the surface with its membership running the gamut from environmentalists to Trotskyites.

Varoufakis, however, has been swift to dismiss the accusation that there is any rift between him and Tsipras:

The second theory then, if we accept Varoufakis' position, is that there was no agreement in the meeting on the text of the statement but that sources within the Eurogroup decided to leak a draft to the media in order to embarrass Athens.

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While this scenario is equally concerning given that it suggests the two sides remain hostile to one another, it nevertheless carries with it the more reassuring inference that there is a single voice from Greece that is able at least to strike a deal if an acceptable one is offered.

However, if factions within the Eurogroup are willing to try to embarrass the Greek delegation in the press it is not grounds for wild enthusiasm. And after numerous leaks from the European Central Bank over recent months it could suggest that the institutions of the monetary union are starting to develop holes as the euro crisis continues.

And so we come to the third theory - mis-communication and misunderstanding. It remains possible that some in the meeting thought that they had reached a deal, while others held that no such deal was ever formally struck. In the confusion that followed the side believing that the text had been agreed upon may well have become frustrated by the reported last minute politicking and attempted to reassure markets that a framework was in place by passing the statement to the FT.

Understandably, if the Greek side believed no such agreement had been struck they were within their rights to deny such a deal existed. This is certainly the implication of Varoufakis' tweet to Spiegel (although note he does not deny the accuracy of the text itself):

Given the stark divisions within the Eurogroup the idea that they simply messed up in communicating their message cannot be ruled out. With Greece's future in the eurozone on the line, however, such mistakes can come with very real costs.

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