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.
Prime Minister Alexis Tsipras sent a delegation to Brussels Saturday with a new set of proposals to close differences on pensions, taxes and a primary surplus target. With positions hardening on all sides, the talks are Mr Juncker’s last attempt to try to bring the sides to a compromise, according to a European Union 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 discussions if progress is made between Greece’s envoy and Mr Juncker’s chief of staff and the aim is to reach an accord before markets open on Monday, according to the official. Both sides are prepared to continue talks on Sunday.
European leaders from German chancellor Angela Merkel to European Union president Donald Tusk have voiced growing exasperation with Greece’s brinkmanship that has pushed Europe’s most-indebted country to the edge of insolvency.
Flitting between intransigence and conciliatory overtures, Mr Tsipras has spent four months locked in an impasse with the country’s creditor institutions. The latest Greek counter-proposal is the second in June. The first was roundly dismissed.
Greek stocks dropped 5.9 per cent on Friday, with bank shares dropping 12 per cent, as talks remained deadlocked. The yield on Greek 2017 bonds rose 137 basis points to 20.03 per cent. US and European equities and the euro-area’s higher-yielding bonds also tumbled amid growing concern Greece will run out of time for reaching a deal to stave off default.
An attempt by Mr Juncker to broker a compromise allowing Greece to defer €400 million (Dh1.65 billion) of cuts in small pensions if it reduced military spending by same amount was spiked by the IMF, Frankfurter Allgemeine Sonntagszeitung reported, citing unidentified people with knowledge of the negotiations. The EU declined to comment on the report.
With a deadline for a deal looming, Mrs Merkel told Mr Tsipras it’s time to accept the framework for financial aid. Greece’s bailout extension expires June 30 and some national parliaments need to ratify any agreement before funds can be disbursed, which narrows the window for a deal.
“Where there’s a will there’s a way, but the will has to come from all sides,” Mrs Merkel said earlier this week. “That is why I think it’s right that we talk to each other again and again.”
Not everyone was good at hiding their frustration. Earlier in the week, Tusk rebuked Mr 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 isn’t willing to take difficult measures, even if they’re unpopular, then Greece will never be saved,” Dutch finance minister Jeroen Dijsselbloem, who leads the euro-area finance chiefs’ meetings, told reporters in The Hague on Friday. “We’ve repeatedly explained to the Greeks how little time there still is.”
German finance minister Wolfgang Schaeuble has asked his staff to conceive a mechanism by which a euro-area state in the future could default on its debt in an orderly way that would ensure the continuity of the currency union, Der Spiegel reported on Saturday, without saying how it got the information.
Speculation on a Greek exit from the euro area 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, the government won’t call snap elections or a referendum, Tsipras told his team on Friday, according to a statement from the government.
“If we have a sustainable agreement, however heavy the compromises, we will lift the weight,” Mr Tsipras said. “Our only criteria is exit from the crisis and the memorandum of servitude. But if Europe wants division and and a continuation of servitude, we will refuse.”
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