Greece and EU finance ministers hit a new impasse late yesterday as creditors accused Athens of failing to compromise despite a looming default next week that risks bouncing it out of the euro.
With EU leaders due in Brussels for a summit being held today in the evening, Greek Prime Minister Alexis Tsipras was set to hold late night talks with representatives of creditor institutions in the hope a deal could be reached.
The Eurogroup of ministers wound up a meeting yesterday evening after little more than an hour because no deal was ready for them to discuss.
“We were prepared to work all night, but we had nothing real to work with,” one euro zone official said. “The loss of trust is becoming extreme ... It is hard to see how we can go on.”
Tsipras had spent hours with European Commission President Jean-Claude Juncker, IMF head Christine Lagarde, European Central Bank chief Mario Draghi and the finance ministers’ chairman Jeroen Dijsselbloem. But by the time Greek Finance Minister Yanis Varoufakis sat down across the street with his 18 counterparts, the negotiations had not produced a draft text.
“It is a negotiation between the institutions and the Greek government,” Finnish Finance Minister Alexander Stubb told reporters. “We have not been able to throw anything back at anyone because there’s nothing on the table.”
Another euro zone official said: “There is less optimism about a deal now than before. The Eurogroup tomorrow may not be the last.” The first official said, however, that without a deal by Saturday to allow a vote in the German Parliament on Monday, Greece could not get the cash to meet a repayment deadline on Tuesday which may place it in default.
Among key unresolved disputes were Greek demands for debt restructuring, which several euro zone ministers rejected, and differences over reforming Greece’s costly pensions system.
German Finance Minister Wolfgang Schaeuble, whose country is the biggest creditor, said preparations for a cash-for-reform agreement had barely advanced. His Austrian colleague was among several to say Greek demands for debt relief were a problem.
The loss of trust is becoming extreme – It is hard to see how we can go on
A Greek official said the creditors’ counter-proposals, handed to Athens on Wednesday morning and rapidly leaked on the Internet, were not acceptable as they stood, but Tsipras hoped for an agreement late yesterday or today when all 28 EU leaders arrive for a regular two-day summit. Before leaving Athens, Tsipras attacked the position of “certain” creditors – a swipe at the IMF – as strange since he said they had rejected fiscal measures Athens put forward.
“This odd stance seems to indicate that either there is no interest in an agreement or that special interests are being backed,” the Premier tweeted. Lagarde spelled out her objection to Greek proposals centred on higher taxes to plug a budget gap.
Greek Finance Minister Yanis Varoufakis (left) speaks with unidentified officials at a Eurozone finance ministers emergency meeting in Brussels, Belgium, yesterday. Photo: Reuters“You can’t build a programme just on the promise of improved tax collection, as we have heard for the past five years with very little result,” she told French magazine Challenges.
An EU official said earlier that the exchange of proposals was a normal part of the negotiation. But a Greek official said the lenders’ five-page document – full of crossings–out and underlining in red ink - differed little from their initial June 3 offer and took scant account of Athens’ proposals.
In Athens, State Minister Alekos Flabouraris, considered close to Tsipras, told the ruling Syriza party’s political committee the creditors’ revised list of demands was absurd.
The talks are especially fraught because there is so little time left to reach a deal before Greece has to make a repayment to the IMF on June 30, the day its current bailout expires.
If Greece misses that payment and is declared in default to the IMF, it could trigger a bank run, capital controls and an eventual Greek exit from the eurozone, showing that membership of the currency is not irrevocable as its founders intended.
Among other unresolved issues were labour laws, collective bargaining, public sector wages, opening up closed professions, investment as well as value-added tax and corporate income tax.
Looking tense, Tsipras was driven into European Commission headquarters through an underground garage to avoid the usual arrival statements, and given only a perfunctory handshake by Juncker before plunging into the meeting.
The Greek proposals featured a series of tax hikes on consumption, businesses and the wealthy and higher contributions to pensions to meet budget targets. The IMF wants to see more savings achieved through budget cuts.