Greece failed again to clinch a deal with its international creditors today, setting up a last-ditch effort on Saturday to avert a default next week amid fears of financial market turmoil.
Euro zone finance ministers ended their third meeting in a week without agreement after the three creditor institutions put a final cash-for-reform proposal on the table in a showdown with Athens’s leftist government.
«The door is still open for the Greek side to come with new proposals or accept what is on the table,» Eurogroup chairman Jeroen Dijsselbloem told reporters before briefing European Union leaders, meeting at a summit next door, on the impasse.
Greek Finance Minister Yanis Varoufakis played down the latest setback after Athens submitted its own proposals, based largely on increases in tax and social contributions that the country’s lenders say would not raise enough revenue to plug a gaping budget hole.
«The institutions are going to look again at the two documents – our documents and their own. There will be discussions with the Greek government, and we’ll continue until we find a solution,» Varoufakis told reporters.
German Chancellor Angela Merkel told centre-right party leaders there must be a deal on Greece before financial markets open on Monday, two participants said. Her comment behind closed doors echoed the height of euro zone debt crisis in 2012, when EU leaders feared a possible meltdown of their single currency.
The sources also quoted her as telling the European People’s Party meeting that Germany, the biggest creditor nation, «will not be blackmailed» by Greece.
Without a deal by the weekend to unlock frozen aid, Greece, which has received two bailouts worth 240 billion euros since 2010, is set to default on a crucial repayment to the International Monetary Fund next Tuesday.
That could trigger a bank run and capital controls, possibly setting Athens on a path out of the euro zone and undermining the founding principle that membership is irrevocable.
«The decision lies exclusively with the Greek authorities. They have, however, rather gone backwards,» German Finance Minister Wolfgang Schaeuble said.
Market jitters are on a much smaller scale now than in 2012, thanks largely to the European Central Bank’s bond-buying programme, and are mostly confined to Greek assets. However, many EU officials and analysts say the longer-term damage to the 19-nation single currency area from a possible Greek exit could be more profound.
After five months of acrimonious negotiations, the heads of the European Commission, ECB and IMF gave leftist Prime Minister Alexis Tsipras an ultimatum to offer a credible reform plan by mid-morning on Thursday, saying they would otherwise send their own version to the Eurogroup.
Greece let the deadline slip, saying it stood by proposals it had submitted on Monday with of some modifications. They included restoring an exemption from value added tax for Greek islands, as demanded by Tsipras’s coalition partners.
The dramatic move came before EU leaders met for a summit on migration, the long-term future of the euro zone and launching a renegotiation of Britain’s membership terms, which has been overshadowed by the Greek crisis.
Tsipras left European Commission headquarters smiling and flashing a thumbs-up sign after three hours of meetings but made no comment. Diplomats said the lenders’ tactics reflected exasperation at his refusal to compromise on key reforms of pensions, labour markets, wages and taxation, which cross his Syriza party’s self-declared «red lines.»
Greek officials say the government has already compromised by offering to raise taxes and pension deductions. They say the lenders keep revising downwards estimates of how much each measure proposed by Greece could raise, making it difficult to come up with an acceptable offer.
Euro zone officials said there would be no further meetings between the creditors and Greece until Saturday morning’s Eurogroup session – both to prevent Tsipras trying to get a political deal at the summit and to make clear to his government that the choice was now «take it or leave it».
Hardline Austrian Finance Minister Hans Joerg Schelling said the final deadline for a deal was Sunday, a day before a German parliament sitting that would have to approve the release of aid to meet the IMF payment.
Greek politicians in Tsipras’ party continued to be defiant.
«The lenders’ demand to bring annihilating measures back to the table shows that the blackmail against Greece is reaching a climax,» Nikos Filis, Syriza’s parliamentary spokesman, told Mega TV.
He said the Greek side was maintaining its insistence on debt relief as part of any accord, in comments that were echoed by Labour Minister Panos Skourletis.
«There cannot be a deal without a substantial reference and specific steps on the issue of debt,» Skourletis said in an interview with state broadcaster ERT.
Frustration was palpable on both sides, with one euro zone official describing the loss of trust in the Greeks as «extreme» and questioning whether an agreement was realistic given the intransigence from Athens.
In Frankfurt, powerful German Bundesbank chief Jens Weidmann voiced concern in a speech about the continued provision of emergency liquidity assistance to keep Greek banks afloat in the face of massive deposit withdrawals.
ECB policy-setters held the limit on this emergency funding for Greek banks steady for a second day running after weeks of increases, raising pressure on Athens.
The mood in Brussels has swung from hope to foreboding this week but seasoned diplomats cautioned that in EU negotiations the situation often looks bleakest before a last-gasp deal.
Among key unresolved issues are Greek demands for debt restructuring, which euro zone governments have said they are not prepared to discuss until Athens implements the reforms.
The more concessions Tsipras makes, the more resistance he will face in parliament within his coalition and on the streets, where recent protests, some organised with Syriza’s support, have underlined opposition to yet more belt-tightening.
«The lenders’ hard core faction does not want a deal but a rift, Greece’s humiliation and the fall of the Tsipras government,» Dimitris Papadimoulis, a Syriza lawmaker at the European parliament, tweeted on Thursday morning.
«It won’t get its way.»
Source: Buenos Aires Herald
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