Greece and its creditors are locked in last-ditch talks, with European Commission President Jean-Claude Juncker trying to broker a deal over the weekend.
Greek Prime Minister Alexis Tsipras sent a delegation to Brussels this weekend with a new set of proposals to close differences on pensions, taxes and a primary surplus target. With positions hardening, the talks are Juncker’s last attempt to reach a compromise, according to an EU official who asked not to be identified.
Representatives of the IMF, the European Central Bank and the European Stability Mechanism are waiting in the wings to join the negotiations if progress is made between Greece’s envoy and Juncker’s chief of staff. The aim was to reach an deal before markets open today, the official said.
European leaders from German Chancellor Angela Merkel to EU President Donald Tusk have voiced growing exasperation with what they describe as Greece’s brinkmanship that has pushed Europe’s most-indebted country to the edge of insolvency.
Juncker warned Tsipras on Thursday that the Eurogroup would start making preparations for a Greek euro exit if creditors did not approve a last-minute deal, Frankfurter Allgemeine Sonntagszeitung reported yesterday, without saying how it obtained the information.
Tsipras has spent four months locked in an impasse with the creditor institutions. The latest Greek counterproposal is the second this month. The first was dismissed.
Greek stocks dropped by 5.9 percent on Friday, with bank shares dropping by 12 percent, as talks remained deadlocked. The yield on Greek 2017 bonds rose 137 basis points to 20.03 percent. US and European equities and the eurozone’s higher-yielding bonds also tumbled amid growing concern Greece that would run out of time for reaching a deal to stave off default.
The IMF spiked an attempt by Juncker to broker a compromise allowing Greece to defer 400 million euros (US$451 million) of cuts in small pensions if it reduced military spending by the same amount, Frankfurter Allgemeine Sonntagszeitung reported, citing unidentified people with knowledge of the negotiations.
The EU declined to comment on the report.
This must “be the last negotiation taking place in crisis conditions,” Greek Minister of Finance Yanis Varoufakis said in a television interview broadcast yesterday.
“The target of the negotiation is get out of the crisis. For that, you need Greece to go back to markets, so a restructuring of the debt is needed,” he said.
Greece would not sign up to a fiscal plan that does not work, Varoufakis said.
Merkel told Tsipras that it is time to accept the framework for financial aid. Greece’s bailout extension expires on June 30 and some national legislatures need to ratify any agreement before funds can be disbursed, which narrows the window for a deal.
“Where there is a will, there is a way, but the will has to come from all sides,” Merkel said last week. “That is why I think it is right that we talk to each other again and again.”
Not everyone was good at hiding their frustration. Earlier last week, Tusk rebuked Tsipras for “dragging his feet” on a debt agreement and the IMF team left Brussels, voicing despair over Greece’s tactics.
“If the Greek government is not willing to take difficult measures, even if they are unpopular, then Greece will never be saved,” Dutch Minister of Finance and Eurogroup President Jeroen Dijsselbloem told reporters in The Hague on Friday.
Speculation about a Greek exit from the eurozone is “exceptionally dangerous,” and such an outcome would have unpredictable consequences, Austrian Chancellor Werner Faymann said in an interview in Real News.
Whatever the outcome, Athens would not call snap elections or a referendum, Tsipras told his team on Friday, according to a statement from the Greek government.
“If we have a sustainable agreement, however heavy the compromises, we will lift the weight,” Tsipras said. “Our only criteria is exit from the crisis and the memorandum of servitude. [However,] if Europe wants division and a continuation of servitude, we will refuse.”
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