The high-stakes game of brinkmanship between Greece and its creditors intensified on Monday after prime minister Alexis Tsipras convened an emergency meeting of his political negotiation team following a stark warning from Athens that default was looming.
Amid mounting fears of financial collapse, Tsipras instructed officials to act speedily as his government sought to defuse tensions saying it would do its best to honour its debts – even if it failed to reveal how, exactly, it would find the money to pay €1.6bn in loans to the International Monetary Fund next month. Technical teams are set to resume talks in Brussels on Tuesday.
“We are very close to a deal,” the finance minister Yanis Varoufakis told reporters. “There are many different Germans, just as there are many different Greeks,” he said responding to reports that Berlin would not be prepared to retreat in what has become an all-out tug of war between the two governments.
Technical teams tasked with negotiating the framework of a cash-for-reform deal to keep the debt-stricken nation afloat, are now scrambling to break the deadlock of almost four months of fruitless talks.
Both sides have signalled they will focus on VAT increases, expected to raise as much as €1bn for the Greek economy, when they reconvene in Brussels on Tuesday.
Also on the table are pension reform, labour deregulation and the ever-incendiary topic of the primary surplus. Tsipras’s anti-austerity administration has argued vociferously that demands for a budget surplus higher than 1.5% will exacerbate the country’s economic death spiral.
The IMF, which wants Greece to achieve a 3% budget surplus as a minimum requirement before releasing bailout funds, has consistently questioned the Greek finance ministry figures put forward since January, when the threat of bankruptcy hit tax receipts and pushed the budget into deficit.
Olivier Blanchard, the IMF’s chief economist, told the French newspaper Les Echos that revising this surplus downwards would lead to new financing needs for which Greece would again need European help. This could only work if, in exchange, Greece presented a coherent programme, he said.
“Considering that the most recent estimates mention a substantial budget deficit, we need credible measures to transform this into a surplus and maintain this surplus in the future,” Blanchard was quoted as saying. “This is far from being the case at the moment.”
The urgency to draw a line under a crisis that has tormented Greeks, and haunted Europe, was thrown into stark relief at the weekend when Athens signalled that the endgame was near.
European stock markets and the euro fell sharply on Monday after the the Greek interior minister, Nikos Voutsis, suggested that Greece would be unable to repay €1.6bn to the IMF next month because it had run out of money.
Athens’ debt repayment schedule becomes even more punishing in July and August when it will be called to hand over some of a €6.7bn loan to the European Central Bank.
Asked about the debt repayment it must make to the IMF on 5 June, Voutsis told Mega TV: “The money is not there to be given and will not be given.”
The leftist-led government has repeatedly said that if faced with the choice of honouring creditor obligations or paying salaries and pensions, it would opt for the latter.
Failure to honour the IMF debt repayment would almost certainly set in motion the groundwork for Greece’s exit from the eurozone. Since 2010, the Washington-based body, along with the EU and ECB, has given Greece an estimated €240bn in rescue loans – the biggest bailout in global financial history.
Cut out of international markets, and unable to issue short-term debt, Athens has been forced to sequester the cash reserves of state bodies – including its embassies – to pay bills.
Greece has not received any bailout aid since August as both sides have haggled over the extent to which it should continue with austerity policies – the price of emergency funds and for the government, the root of the country’s recession-driven decline.
“We are seeking a deal that will give prospect to the country and will take it out of the cycle of austerity and recession,” the interior minister told the leftwing radio station Kokkino. “There is not going to be a second generation of compromise, concessions and austerity measures.”
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