Business World

Sunday 11 December 2016

Greece and international creditors fail in 'last attempt' to reach deal - Athens stumbles closer to default

* Finance ministers must make political decision on Thursday
* German Social Democrat turns on Tsipras
* Sentiment growing that "enough is enough" - Gabriel

Jan Strupczewski and Renee Maltezou

Published 14/06/2015 | 21:37

Alexis Tsipras
Alexis Tsipras
Alex Tsipras

Talks on ending a deadlock between Greece and its international creditors broke up in failure earlier today, with European leaders venting their frustration as Athens stumbled closer towards a debt default that threatens its future in the euro.

  • Go To

European Union officials blamed the collapse on Athens, saying it had failed to offer anything new to secure the funding it needs to repay €1.6 billion ($1.8 billion) to the International Monetary Fund by the end of this month.

Greek Prime Minister Alexis Tsipras, left, and European Commission President Jean-Claude Juncker participate in a bilateral meeting on the sidelines of the EU-CELAC summit in Brussels. Photo: AP
Greek Prime Minister Alexis Tsipras, left, and European Commission President Jean-Claude Juncker participate in a bilateral meeting on the sidelines of the EU-CELAC summit in Brussels. Photo: AP
Time is running out for Greek Prime Minister Alexis Tsipras to negotiate a bailout deal. (AP)

Greece retorted it was still ready to talk, but that EU and IMF officials had said they were not authorised to negotiate further. Athens insists it will never give in to demands for more pension and wage cuts.

"This is very disappointing and sad. It was a last attempt to bridge our differences but the gap is too large. One can discuss a gap, but this is an ocean," said a person who was close to the talks.

Read more here: Defiance from ordinary Greeks as country teeters on debt abyss  

Both sides acknowledged the talks had lasted less than an hour, although even here accounts differed: Greece put the length at 45 minutes, EU officials at half an hour.

Following what it called this "last attempt" at a solution, the EU's executive Commission said euro zone finance ministers would now tackle the issue when they meet on Thursday.

With no technical deal apparently possible, the ministers are likely to have to make difficult political decisions on Greece's membership of the currency bloc.

German Chancellor Merkel and Greek Prime Minister Alexis Tsipras
German Chancellor Merkel and Greek Prime Minister Alexis Tsipras
Greek Prime Minister Alexis Tsipras (L) is welcomed by European Commission President Jean-Claude Juncker ahead of a meeting at the EU Commission headquarters in Brussels, Belgium, June 3, 2015. Greece's international creditors signalled on Wednesday they were ready to compromise to avert a default even as Athens warned it might skip an IMF loan repayment due this week. REUTERS/Francois Lenoir
Greece's Prime Minister Alexis Tsipras arrives at Syriza headquarters to brief senior party members about the bailout negotiations in Athens. (AP)

Read more here: European stocks trim their weekly gain amid Greek concern  

Failure to keep Greece in the euro, after years of arduous negotiations and two emergency bailouts totalling 240 billion euros, would send it lurching into the unknown and mark a historic blow to the EU's most ambitious project.

Last Friday, Greek Prime Minister Alexis Tsipras had indicated he would accept painful compromises on demands for austerity and reform in return for debt relief.

But the Commission said after the talks, which also involved the European Central Bank, that "the Greek proposals remain incomplete".

"While some progress was made, the talks did not succeed as there remains a significant gap between the plans of the Greek authorities and the joint requirements of Commission, ECB and IMF," it said. These amounted to up to 2 billion euros a year in permanent budget savings.

Read more here: Greece to present new bailout plans  

Greek Finance Minister Yanis Varoufakis attends a parliamentary session where Greek Prime Minister Alexis Tsipras will brief lawmakers over the ongoing talks with the country's lenders, in Athens, Greece. Photo: Reuters
Greek Finance Minister Yanis Varoufakis attends a parliamentary session where Greek Prime Minister Alexis Tsipras will brief lawmakers over the ongoing talks with the country's lenders, in Athens, Greece. Photo: Reuters
Greek Finance Minister Yanis Varoufakis attends a parliamentary session where Greek Prime Minister Alexis Tsipras will brief lawmakers over the ongoing talks with the country's lenders, in Athens, Greece June 5, 2015. Greece's government rejects an "absurd" and "unrealistic" proposal from creditors and hopes it will be withdrawn, Prime Minister Alexis Tsipras said on Friday as he called on lenders to accept a rival proposal from Athens instead. REUTERS/Alkis Konstantinidis
Greek Prime Minister Alexis Tsipras addresses the Greek Parliament in Athens. Photo: Getty Images

EU officials said Athens had moved closer to the lenders on the size of Greece's primary surplus - the budget balance before its debt repayments - but had not said how it intended to achieve this. Otherwise the Greek delegation, led by Deputy Prime Minister Yannis Dragasakis, had offered nothing new, they added.

Dragasakis said the Greek delegation remained ready to resume talks but blamed European lenders for insisting on pension cuts and value-added tax hikes to close the projected budget gap.

CONFRONTATIONAL LINE

European leaders have piled pressure on Tsipras to offer major concessions in the search for a deal with the EU and IMF as the country faces a debt default in just over two weeks.

The talks' failure followed signs of an increasingly confrontational line by Greece's European Union partners. The toughest language came not from Greece's long-standing conservative critics but from German Social Democrat chief Sigmar Gabriel, who until recently had been regarded as sympathetic, at least by Berlin standards.

He wrote in Bild newspaper that he wanted to keep Greece in the euro. "But not only is time running out but so too is patience across Europe. Everywhere in Europe, the sentiment is growing that enough is enough," said Gabriel, who is vice-chancellor in Angela Merkel's grand coalition government.

Read more here: Alexis Tsipras seeks debt relief as Greeks take offer to Brussels  

"The shadow of an exit of Greece from the euro zone takes on ever clearer shape," he said. "Repeated apparently final attempts to reach a deal are starting to make the whole process look ridiculous. There is an ever greater number of people who feel as if the Greek government is giving them the run-around."

Germany's Frankfurter Allgemeine Sonntagszeitung reported European Commission President Jean-Claude Juncker, also reputed to have been more sympathetic to Greek views, warned Tsipras about the risk of "Grexit" - a Greek exit from the euro - when they met last week.

Tsipras says imposing yet more austerity on a country whose economy has shrunk by a quarter in recent years is futile, and will only deepen the suffering of Greeks whose living standards have already dived while unemployment soared.

"REGIME CHANGE"

US-based economic analyst Jacob Funk Kirkegaard cast doubt on the Athens government's longevity. He said Europe seemed to be giving up on trying to coax Tsipras towards the political centre, opting for confrontation that might lead to "a new more realistic government".

Read more here: Greece on brink as IMF walks out of debt talks  

"It is increasingly obvious he is not even a closet centrist but largely seems to agree with the left wing of his party. The euro area thus has no real choice but to seek regime change in Athens," he said on the website of the Peterson Institute for International Economics.

Tsipras still seems to have some support in his quest for debt relief. A person familiar with the negotiations told Reuters that discussions were under way on the issue.

Athens faces immediate problems in repaying debts as the EU and IMF have not paid any money from Greece's bailout programmes since the middle of last year. On top of the IMF loan, it must also repay 6.7 billion euros when Greek bonds held by the ECB fall due in July and August.

Even if this short-term hump can be overcome, Greece still faces the daunting prospect of eventually repaying the bailout loans, something that will hang over its enfeebled economy for decades unless a relief deal is achieved.

Reuters

Read More

Promoted articles

Editors Choice

Also in Business