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Greece's euro future in turmoil as creditors demand more austerity

GREECE'S Eurozone future was thrown into fresh turmoil last night as creditor powers demanded further austerity measures to release the funds the country needs to avoid an impending debt default.

Dashing tentative hopes that an agreement will be struck at a European Union leaders' summit today, a meeting of finance ministers was suspended after less than an hour last night as Alexis Tsipras, the Greek prime minister, was summoned for further late-night talks with European Commission president Jean-Claude Juncker.

Greece's three lending institutions rejected Athens' reform plans, five days before its bailout programme officially expires.

In a five-page set of counter-proposals, the commission, the International Monetary Fund (IMF) and the European Central Bank (ECB) demanded that Athens' Leftist government carry out more spending cuts, abolish exemptions on VAT and implement a root and branch overhaul of its pensions system.

The Greek government was quick to reject the demands, attacking them as "absurd" and sure to bring "Armageddon" to the beleaguered economy.

Having been summoned to Brussels yesterday morning, Mr Tsipras released an ambiguous statement suggesting ulterior motives behind the lenders' fresh demands.

"The repeated rejection of equivalent measures by certain institutions never occurred before - neither in Ireland nor in Portugal," said Mr Tsipras. "This curious stance may conceal one of two possibilities: either they don't want an agreement or they are serving specific interest groups in Greece."

Mr Tsipras spent much of the day in meetings with Mr Juncker, IMF chief Christine Lagarde and ECB chief Mario Draghi, as the sides sought to thrash out their differences. If no agreement is reached, matters could continue during another summit lasting into the weekend.

Greece's creditors rebuffed an €8bn plan to raise taxes and amend the social security system.

Sticking points continued to centre on the pensions system, with lenders demanding bolder reforms to end early retirement and larger contributions to the government's pensions pot. They also demanded that national defence spending cuts double to €400m in 2016.

The austerity plans are likely to be rejected by Mr Tsipras's Leftist faction as a further contractionary measure when the economy has already fallen into recession.

"The institutions tabled a new proposal which transfers the burden [of austerity] to wage earners and pensioners in a way which is socially unfair, while at the same time suggesting measures to avoid the increase of burden on those who have (to give)," said a Greek government statement.

Speaking ahead of the third meeting of finance ministers in less than a week, Finland's Alexander Stubb said Greece had yet to put any firm measures on the table. "We haven't seen a concrete proposal. These are not decisions we take lightly; we have to work them through first." (© Daily Telegraph, London)

Irish Independent