Greece’s creditors have set the country a weekend deadline to avoid default and stay in the eurozone, after more than 24 hours of non-stop Brussels negotiations at the highest level resulted in stalemate.
After talks between Athens and its creditors failed to reach an agreement on Thursday, a further meeting of eurozone finance ministers will be held on Saturday in a bid to achieve a breakthrough. With the German chancellor Angela Merkel insisting that a deal must be reached before markets open on Monday morning, Greece is now running out of time to secure an accord and make a €1.6bn payment to the International Monetary Fund (IMF) on Tuesday.
Following a 24-hour period that involved three rounds of talks between Greek prime minister Alexis Tsipras and Greece’s creditors, as well as two sessions of eurozone finance ministers, officials described the situation as entrenched and immobilised.
“They can talk and talk, but the gap does not narrow,” said an EU official. “Both sides are in their trenches.” Arriving at an EU leaders’ summit on Thursday evening that threatened to be overshadowed by the Greek crisis, Merkel said Greece had “gone backwards” on some issues.
Merkel abandoned her usual conciliatory tone to privately tell fellow European centre-right leaders: “Germany cannot be blackmailed.” Dropping the good cop-bad cop act that contrasts Merkel’s cautious tone with the hawkish attitude of her finance minister, Wolfgang Schäuble, she said the situation was regressing in the marathon negotiations.
Ahead of the evening summit, a session of eurozone finance ministers broke up without agreement after the troika of lenders – the European Central Bank (ECB), the IMF, and the European commission – dismissed Greek reform proposals from earlier in the week. The creditors tabled their own tougher terms for a settlement that would unlock a remaining €7.2bn in bailout funds for Greece and hold out the prospect of later debt relief and more rescue funds.
Finance experts from both sides are to work non-stop between Thursday evening and Saturday lunchtime, when the eurozone finance ministers are expected to reassemble for what looks like the last of many last chances.
Tsipras appears to have little room or time for manoeuvre. There was speculation he could call a referendum or fresh elections after he made the unusual move of calling Athens to speak to Greece’s head of state.
Merkel’s Monday deadline reflected the tight timetable that has now been imposed on Greece. If agreement is struck on Saturday, the terms would need to be rushed through the Greek parliament on Sunday, then through the Bundestag in Berlin on Monday, in order to ensure that the bailout programme, which expires on Tuesday, is extended.
With no agreement, the ECB will withdraw its support to the ailing Greek banking system on Tuesday, which would force the Athens government to impose capital controls in order to prevent bank runs.
“If there is no package, the situation for the ECB is clear,” said an informed source.
Such is the level of urgency, the German government on Thursday forwarded the text of the creditors’ terms to the parliament in Berlin in preparation for Monday.
On the other hand, EU officials said that if a last-minute solution is found on Saturday, the IMF payment could be facilitated by the ECB forwarding profits due to Greece on its bond holdings to the Washington-based institution. The ECB is believed to owe Greece around €2bn in profits from its securities markets programme.
The EU commissioner for economic and financial affairs, Pierre Moscovici, said Greece and its creditors were still at loggerheads over reforms to Greek pensions and VAT rates, which lenders want to be toughened as quid pro quo for giving Athens further bailout funds.
Meanwhile, the IMF told reporters in Washington that it would not move its 30 June deadline for the €1.6bn payment. “As a matter of longstanding policy, the fund does not extend payment deadlines,” said a spokesman for the IMF.
However, Greek officials began to voice optimism late on Thursday that an agreement could be reached.
Echoing Merkel, insiders in the Syriza-led government said it was vital that Greece cut a deal with the bodies keeping it afloat before markets opened on Monday.
“There is a detectable shift in stance. Under pressure, lenders have retreated on several issues,” said Syriza’s prominent euro MP Dimitris Papadimoulis.
“We are beginning to see that differences are bridgeable, that an agreement will be reached.”
But mounting anger over the sheer scale of concessions Athens will be forced to make will ensure that any deal faces a difficult passage.
Several leading government members accused creditors on Thursday of attempting to impose regime change in Athens by pushing the government too far from its electoral mandate of ending austerity.
“It is clear they want to reduce the government’s authority,” railed the Labour minister Panos Skourletis, joining the chorus of politicians who have accused the EU and IMF of wanting to topple Europe’s first far left administration.
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