Greek bailout talks to resume
Crucial talks between Greece and its international creditors have ended without result, casting fresh doubt over the country’s future in the euro.
After an eight-hour grilling into the night, Greek prime minister Alexis Tsipras left talks in Brussels with the leaders of the three main institutions handling his country’s massive debts without talking to reporters.
Technical experts were due to resume their deliberations this morning to thrash out the details of Greece’s reform plans and see whether the proposals meet the lenders’ loan conditions less than a week before for a new debt payment is due.
Earlier, the impasse forced eurozone finance ministers to cut short a meeting, which they also plan to resume today. Concern over the lack of progress weighed on financial markets, with stock indexes falling in the US.
Greece has promised mainly tax increases to achieve budget savings, whereas the International Monetary Fund would like more spending cuts. Mr Tsipras rejected the creditors’ new suggestions, saying they put both sides further away from a deal.
"The Greek side is unable to agree on such a course," a Greek government official said after Mr Tsipras had assessed the proposals, which included fresh cuts in public sector payrolls and a timetable to scrap a pension safety net fund.
“These are very tough negotiations,” the official said. “But there is a common will to get somewhere.”
The new roadblock came as some surprise. The finance ministers had been due to meet to iron out details about the reforms in time for EU leaders to approve at a two-day summit starting today. It appears likely they will have to work right up to the summit.
Greece has a €1.6bn debt to pay on Tuesday which it cannot afford unless the creditors unfreeze €7.2bn in bailout money.
A Greek exit from the euro would be hugely painful for the country. Some experts say it could be manageable for Europe and the world economy, but that remains unclear.
The latest disagreement weighed on the Athens Stock Exchange, which earlier closed down 1.8% after big gains on the previous two days. Government bond yields in Greece, Spain and Portugal rose, an indication of investor concern.
Elected on an anti-bailout platform in January, Mr Tsipras’ left-wing Syriza party had promised to scrap all austerity measures and demand forgiveness on a chunk of the country’s bailout debt.
Mr Tsipras has had to backtrack partly on those pledges and now could have trouble persuading party MPs to back a new deal, which would have to be approved by Monday night.
Athens was forced into concessions by a punishing debt repayment schedule and an economy hammered by uncertainty – a return to mild recession, ratings downgrades and dramatic outflow of bank deposits that threatened to crash the country’s financial system.
Greek economy minister Giorgos Stathakis said that so far, all sides had made concessions.
He said Greece had convinced creditors to lower their demands for a primary surplus – the surplus when not counting interest payments on debt. As a result, that should help the Greek economy grow between 1% and 1.5% this year.
Meanwhile, the country’s banks remained under pressure as Greeks continued to withdraw money amid concerns over the country’s financial future.
The European Central Bank had to increase again yesterday the amount of emergency credit that Greek banks can draw. The move is meant to help the banks cope with the outflows of cash.
The ECB has increased its support to Greek banks every working day since Friday, a sign of how big a strain the uncertainty is having on the financial system.
