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Greece crisis - Merkel says Eurogroup talks will be decisive on Saturday Greek creditors report progress in bailout talks
(about 9 hours later)
The German chancellor, Angela Merkel, has said an emergency eurozone meeting on Saturday will be “decisive” in resolving the Greek debt crisis, as Athens faces a critical 24 hours in its attempt to avoid a debt default. Greece’s international creditors have said they are close to a deal that would unlock€15.5bn (£10.9bn) in rescue funds for the debt-laden country, despite signs of hardening political opposition in Athens as Greek Prime Minister Alexis Tsipras accused lenders of “blackmail”.
European officials in Brussels were resuming efforts on Friday to resolve the standoff between Greece and its creditors, but are running out of time to prevent the indebted country missing a €1.6bn (£1.1bn) payment to the International Monetary Fund on Tuesday and the severing of life support to its banking system. Greece’s creditors - the European Commission, European Central Bank and International Monetary Fund - are ready to offer the nearly-bankrupt nation €15.5bn in bailout funds in a five-month extension of the bailout until the end of November.
Related: Greece crisis: Tsipras rejects latest creditor proposal – live
One EU source said the two sides were 90% of the way to a deal which would involve spending cuts in exchange for financial assistance. Disagreements over pension spending have been resolved and differences over VAT reforms have almost been squared.
However, Greek prime minister Alexis Tsipras left an EU leaders’ summit with harsh words for the creditors’ offer, while members of his government slammed the prospect of a bailout extension back in Athens. “The European Union’s founding principles were democracy, solidarity, equality and mutual respect. It was not based on blackmail and ultimatums,” said Tsipras. The Greek labor minister, Panos Skourletis, said: “We have moved from a take-it-or-leave-it scenario to the proposal of a five-month extension that makes no sense.”
The German chancellor Angela Merkel said Greece had been made “a very generous offer” by the creditor institutions. “We have taken a step,” she said. “I believe it is not time for Greece to make a similar step in our direction.”
Jean-Claude Juncker, the president of the European Commission, dismissed Tsipras’s accusations of blackmail. “The position of the institutions is not a take-it-or-leave it [deal],” he said. “It is not European not to listen to the others,” he said in an apparent dig at Tsipras.
But EU sources sounded confident they were getting close to agreement. “It’s ridiculous to block agreement for so little,” one EU negotiating source said.
Greece is still holding out on limiting defence spending cuts, while privatisation arrangements for regional airports have yet to be agreed, but sources say differences are minimal.
Another eurozone source said Tsipras has to get the deal through the Greek parliament on Sunday to secure the five-month extension before Tuesday, the day Greece must repay €1.6bn to the IMF and when its bailout programme expires. Without a bailout programme in place, the ECB is expected to pull its support for the Greek banking system, which would likely trigger capital controls in Athens.
If the deal is agreed, it will have to be approved by the Greek parliament and the German Bundestag.
The latest €15.5bn bailout offer consists of €8.7bn from the eurozone bailout fund, €3.5bn from IMF and a further €3.3bn from ECB bond profits due to Greece.
Related: Greece crisis: markets open lower ahead of weekend talks – liveRelated: Greece crisis: markets open lower ahead of weekend talks – live
After talks between Athens and its creditors ground to a halt on Thursday, a further meeting of eurozone finance ministers will be held on Saturday in a bid to achieve a breakthrough. Saturday is realistically the last chance for the Greek prime minister, Alexis Tsipras, to strike an agreement, because the country’s lenders are demanding the parliament in Athens ratifies any deal before markets open on Monday. Eurozone finance ministers will hold a last-ditch meeting on Saturday in a bid to get a deal, following four failed attempts over eight days.
Speaking after a meeting of European leaders broke up early on Friday morning, Merkel said the Saturday Eurogroup meeting “will be decisive because time is of the essence”.
“Every member of the European council [EU leaders] strongly supported that every effort has to be made to bring about a solution.”
Greece’s three creditors – the IMF, the European commission and the European Central Bank – are studying the latest compromise proposal from Greece, after high-level talks collapsed on Thursday when it became clear Athens was not going to give in to creditor demands for further austerity. The lenders are demanding spending cuts in exchange for releasing the final €7.2bn (£5.1bn) tranche of funds due under Greece’s current bailout programme. Key differences remain between both sides over pensions, VAT rates and taxation.
Merkel has made it clear she wants a deal before Monday when the financial markets and the banks reopen after the weekend. Tuesday is a critical day for Greece because, alongside the IMF payment, its bailout programme also expires on 30 June. Without the shelter of a bailout deal, the ECB is expected to cut off emergency support to Greek banks, who are relying on the central bank to cover deposit withdrawals that reached more than €4bn last week. Without that support, Tsipras could be forced to impose capital controls, as a dearth of euros in the economy forces Greece to consider launching a parallel currency.
Uncertainty about the deal pushed down stock markets in Asia on Friday and is also expected to weigh on European markets. “Perhaps a wider concern for markets is that each day the institutions lose more credibility when these arbitrary ‘final’ deadlines gets missed,” said Jasper Lawler of CMC Markets.
Days of back-to-back meetings involving Europe’s most powerful leaders and finance ministers have failed to break the deadlock, leaving Greece’s future in the eurozone hanging by the finest of threads.Days of back-to-back meetings involving Europe’s most powerful leaders and finance ministers have failed to break the deadlock, leaving Greece’s future in the eurozone hanging by the finest of threads.
The eurozone now has until Saturday night to strike the deal that has eluded them for more than four months, since Greece won an extension on its €240bn (£171bn) bailout in February, giving it breathing space to negotiate terms with its creditors. But Merkel has made it clear she wants a deal before Monday when the financial markets and the banks reopen after the weekend.
On Thursday, the IMF reiterated its warnings that no repayment extension was on offer. Being in arrears to the IMF could force Greek out of the eurozone, the “Graccident” that EU leaders insist they want to avoid. Any deal agreed in Brussels has to be backed by the Greek parliament. The pressure on Greece is immense as the ECB has pressed pause on emergency funding for Greek banks. The Greek financial system has received around €89bn of emergency liquidity funds from the ECB, but in recent days the tap has been turned off. The ECB did not increase emergency funds on Thursday or Friday, having increased it on five previous consecutive days.
Greece’s lenders are demanding deeper spending cuts from Athens, as well as faster, more sweeping reforms to its pension system. The Greek government had hoped to appease its creditors with a plan based mostly on €8bn of tax increases – measures that brought hundreds of protesting pensioners on to the streets of Athens. Although Greek banks are running out of cash, it is far from clear that Tsipras can carry the rest of the ruling hard-left Syriza coalition with him on the bailout deal.
Key differences remain, with Greece offering to raise the retirement age to 67 by 2025 as part of its pension reforms, but creditors demanding an earlier date of 2022. On VAT, the lenders want hikes equivalent to 1% of GDP this year, while Greece wants 0.74%. Despite pushing for a steeper VAT bill, the creditors are also seeking to curb a proposed increase in corporation tax.
The Greek team presented the creditors with a fresh proposal on Thursday, but ministers decided it needed further study. An EU official said Greece’s three creditorswould study the latest Greek proposal to see if there was anything worth incorporating into a fresh compromise text. The official added that lenders had already conceded much to the Greeks.
Greece’s finance minister, Yanis Varoufakis, said on Thursday both sides would keep on seeking an agreement as they try to square the differences between a Greek plan submitted on Monday and the lenders’ counter-proposal. He said: “We shall continue our deliberations, 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.”
However, it is far from clear that Tsipras can carry the rest of the ruling hard-left Syriza coalition with him.
One Syriza MP, Costas Lapavitsas, said leaving the eurozone could offer fresh hope, and was preferable to “blackmail” by Greece’s creditors. Writing in the Guardian, he said Greece had come face to face with the “ruthless reality” of the eurozone.One Syriza MP, Costas Lapavitsas, said leaving the eurozone could offer fresh hope, and was preferable to “blackmail” by Greece’s creditors. Writing in the Guardian, he said Greece had come face to face with the “ruthless reality” of the eurozone.
“The “institutions” are once again attempting to impose the policies that have failed abysmally since 2010, causing huge contraction of GDP, vast unemployment and mass impoverishment. [Accepting the current proposal from the institutions] would be a national disaster accompanied by the complete humiliation of the Syriza government.” “The “institutions” are once again attempting to impose the policies that have failed abysmally since 2010, causing huge contraction of GDP, vast unemployment and mass impoverishment. [Accepting the proposal from the institutions] would be a national disaster accompanied by the complete humiliation of the Syriza government.”