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Greece crisis: creditors aim to strike deal to include six-month rescue extension
Creditors offer Greece six-month bailout reprieve as Tsipras weighs response
(about 3 hours later)
Greece’s creditors are aiming to strike a deal on Monday to stop Athens defaulting on its debt and possibly tumbling out of the euro, by extending its bailout by six months, supplying up to €18bn in rescue funds and pledging later debt relief for the austerity-battered country.
Greece’s international creditors are aiming to strike a deal to stop Athens defaulting on its debt and possibly tumbling out of the euro by extending its bailout by six months and supplying up to €18bn (£12.9bn) in rescue funds.
But EU officials, privately disclosing details of the proposed deal, stressed that a breakthrough hinged on the prime minister, Alexis Tsipras, making concessions on fiscal targets, pensions cuts and tax increases that he has resisted since he came to power five months ago. Following a cabinet meeting in Athens, Tsipras is believed to have offered Greece’s creditors concessions on tax and pensions reform. But it was not clear whether the offer went far enough to make a final agreement possible on Monday.
The Brussels-based negotiating team are also proposing to pledge debt relief for the austerity-battered country – but officials stressed that a breakthrough hinged on a positive response from the Greek prime minister, Alexis Tsipras.
Time is also running out for the Greek banking system, with Reuters reporting on Sunday that €1bn worth of withdrawal orders had been lodged with Greek banks over the weekend – on top of the €4bn that left the Greek banking system last week – and that the European Central Bank was set to discuss extending financial help to those institutions on Monday morning, amid fears that Greek banks would be unable to open on Tuesday.
Negotiations were continuing on Sunday night, hours ahead of crucial gatherings of eurozone finance minsters and leaders in Brussels, which Angela Merkel, the German chancellor, François Hollande, the French president, and Tsipras are expected to attend. All three leaders spoke over the weekend, with contributions from European commission head Jean-Claude Juncker.
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The crisis meeting was convened in an attempt to ease Greece’s debt crisis before a critical €1.6bn payment to the International Monetary Fund falls due next Tuesday.
A hectic round of telephone diplomacy took place on Saturday and Sunday between leaders in Athens, Berlin, Paris and Brussels while technocrats on both sides sought to hammer out the small print of the fiscal arithmetic forming the basis for a last-minute agreement days before Greece’s bailout expires. Greece must pay €1.6bn owed to the International Monetary Fund by Tuesday 30 June.
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With time running out, the only way an IMF default could now be avoided is for the ECB to raise the ceiling on the short-term debt or T-bills Athens is allowed to sell, the officials said. This would need to happen by Monday next week.
Greece’s creditors were still waiting for Tsipras and his Syriza party to formally submit revised fiscal targets, pensions cuts and tax increases in an attempt to secure the six-month lifeline, concessions that the country’s leader has resisted since he came to power five months ago.
The sources also signalled moves to assuage Tsipras’s key demand – that the creditors need to offer debt relief to Greece. Some form of debt restructuring would be promised to Athens, but it would come with strings attached and not as part of the current bailout package, they said.
At a cabinet meeting in Athens earlier on Sunday, Tsipras is believed to have discussed offering Greece’s creditors – the European Central Bank (ECB), the IMF and the European commission – unspecified concessions on tax and pensions reform.
Eurozone finance ministers will meet at lunchtime on Monday in Brussels, four days after a previous session collapsed in mutual recrimination in Luxembourg. Their meeting was brought forward by two and a half hours and will be followed by an emergency eurozone summit in Brussels aimed at averting the first ever departure of a country from the single currency.
A statement from Tsipras’s office said: “The prime minister presented [Merkel, Hollande and Juncker] with Greece’s proposal for a mutually beneficial agreement that will give a definitive solution and not a postponement of addressing the problem.”
The summit is a success for Tsipras who has consistently demanded that the debt crisis can be resolved only by Europe’s political leaders. But for the summit to have a chance of succeeding, the finance experts from the creditors – the IMF, the European Central Bank and the European commission – and their Greek counterparts have to nail down the detail to put before the ministers and government leaders.
However, it was not clear that Tsipras would be able to go far enough to make a final agreement possible on Monday, when the country’s banks and the international money markets reopen after another weekend of pressure on the Greek financial system.
If the talks remain inconclusive on Monday evening, another eurozone summit could be convened, either next week as Greece’s bailout lapses or as part of a regular scheduled full EU summit on Thursday and Friday.
“This will entirely depend on the eurogroup [finance ministers] and the summit tomorrow,” said one official.
Membership Event: Guardian Newsroom: Should Greece leave the Euro?
Membership Event: Guardian Newsroom: Should Greece leave the Euro?
The Greek cabinet met on Sunday to discuss what a source close to the government said was an outline proposal drawn up on Saturday by the prime minister’s closest political and economic advisers.
Reuters reported on Sunday that €1bn worth of withdrawal orders had been lodged with Greek banks over the weekend – on top of the €4bn that left the country’s banking system last week. The news agency also said that the European Central Bank was set to discuss extending financial help to the banks this morning, amid fears that Greek banks would be unable to open on Tuesday.
It included changes to the tax and pension systems. But, the source said, Greece’s negotiators would not have a mandate to concede a VAT rise on electricity. And they would have to operate within strict limits in discussing pensions cuts. The proposals were said to include a new three-band income tax system. But there would be no offer of a change in property tax.
A hectic round of telephone diplomacy took place over the weekend between leaders in Athens, Berlin, Paris and Brussels while technocrats on both sides sought to hammer out the small print of the fiscal arithmetic forming the basis for a last-minute agreement days before Greece’s existing bailout expires.
Benefit cuts are perhaps the most delicate of all the issues that Tsipras’s government has so far defined as red lines not to be crossed. The source said Athens was only ready to concede a reduction in higher pensions that would affect no more than 80,000 people. But a topup for the worst-off pensioners would remain untouched.
With time running out, the only way an IMF default could now be avoided is for the ECB to raise the ceiling on the short-term debt Athens is allowed to sell, the officials said. This would need to happen by Monday next week. Brussels sources also signalled moves to address Tsipras’s key demand – that the creditors need to offer debt relief to Greece.
The Greek concessions were also said to include new taxes, the elimination of early retirement allowances and a levy on companies.
Some form of debt restructuring would be promised to Athens in the future, but it would come with strings attached and not as part of the current bailout package, they said.
According to state television ERT, the new Greek proposal also includes increasing Greece’s primary surplus target to 1% of gross domestic product for this year, as demanded by the creditors and hitherto resisted by Athens. The primary surplus refers to the amount that tax income collected by the government exceeds state spending, excluding debt servicing costs. By agreeing to a higher primary surplus, Tsipras effectively agrees to greater austerity than previously sanctioned.
Yanis Varoufakis, the outspoken Greek finance minister, said on Sunday that Greece’s fate hinged on Merkel, and told her she faced a stark decision. But his spokesman reacted sceptically to suggestions of creditor promises on eventual debt relief, describing the eurozone as “pathological liars”.
Apart from the €1.6bn due to the IMF next week, Greece has to redeem almost €7bn worth of bonds at the ECB in July and August. It does not have the money.
Eurozone finance ministers will meet at lunchtime on Monday in Brussels, four days after a previous session collapsed in mutual recrimination in Luxembourg. The summit is a success for Tsipras, who has consistently insisted that the debt crisis can be resolved only by Europe’s political leaders. The Greek cabinet met on Sunday to discuss what a source close to the government said was an outline proposal drawn up by the prime minister’s closest political and economic advisers. It included changes to the tax and pension systems.
The six-month rescue extension being mooted would see Greece qualify for €7.2bn in bailout funds still to be disbursed as well as €10.9bn already lent to Greece but earmarked for bank recapitalisation. The latter sum could be quickly transferred to the government to facilitate the ECB bond redemption. The other money would be tied to progress on Greek economic reforms, notably the detail of the 2016 budget that Tsipras will table in the autumn.
Pensions and benefit cuts are perhaps the most delicate of all the issues that Tsipras’s government has so far defined as red lines not to be crossed.
Yanis Varoufakis, the outspoken Greek finance minister, said Greece’s fate hinged on the German chancellor, Angela Merkel, and told her she faced a stark decision. He added that there would be no agreement that did not include the prospect of debt relief for Greece.
The source said Athens was only ready to concede a reduction in higher pensions that would affect no more than 80,000 people. The Greek concessions were also said to include new taxes, the elimination of early retirement allowances and a levy on companies. According to the state television channel ERT, the new Greek proposal also includes the Tsipras government in effect agreeing to greater austerity than previously sanctioned. The country would set a new target of running a surplus amounting to 1% of the country’s gross domestic product.
Varoufakis’s spokesman reacted sceptically to suggestions of creditor promises on eventual debt relief, describing the eurozone as “pathological liars”.
The six-month rescue extension being mooted would see Greece qualify for €7.2bn in bailout funds still to be disbursed as well as €10.9bn already lent to the country but earmarked for recapitalisation of its weakened banks. The latter sum could be quickly transferred to the government to facilitate debt repayments.
“The prime minister presented [Merkel, Hollande and Juncker] with Greece’s proposal for a mutually beneficial agreement that will give a definitive solution and not a postponement of addressing the problem,” a statement from Tsipras’s office said.
The last-ditch talks come as Tsipras’s Syriza party plans a rally in Athens to send “a loud message of resistance” against demands for more cuts and tax hikes in a country battered by years of recession.
“Democracy cannot be blackmailed, dignity cannot be bargained,” the party said in a statement on Sunday. “Workers, the unemployed, young people, the Greek people and the rest of the peoples of Europe will send a loud message of resistance to the alleged one-way path of austerity, resistance to the blackmail and scaremongering.”
