Greek Prime Minister Alexis Tsipras made a new offer on a reforms package to foreign creditors yesterday, signalling eleventh-hour concessions to break a deadlock that has pushed Greece to the brink of bankruptcy.
Later yesterday Tsipras’s office also announced he will meet the heads of the European Commission, European Central Bank and International Monetary Fund today ahead of a summit aimed at reaching a deal over debt talks.
The summit of eurozone leaders was called last week to try to break a deadlock that has left Greece on the brink of defaulting on €1.6 billion of debt repayments to the IMF that fall due at the end of the month.
Tsipras will meet EU Commission President Jean-Claude Juncker, Eurogroup President Jeroen Dijsselbloem, European Central Bank President Mario Draghi and IMF chief Christine Lagarde. After months of wrangling and with anxious depositors pulling billions of euros out of Greek banks, Tsipras’s leftist government showed a new willingness over the weekend to make concessions that would unlock frozen aid to avert default.
If the EU lets Athens get away with its intransigence, we can bury the euro
It was not immediately clear how far the new proposal yielded to creditors’ demands for additional spending cuts and tax hikes, but the offer was a ray of hope that a last-minute deal may yet be wrangled.
Tsipras was yesterday holed up in a marathon Cabinet meeting and discussed the new offer with the leaders of Germany, France and the European Commission by phone.
“The Prime Minister presented the three leaders Greece’s proposal for a mutually beneficial agreement that will give a definitive solution and not a postponement of addressing the problem,” a statement from Tsipras’s office said.
Tsipras, elected on a pledge to end austerity, has defiantly resisted demands to cut pension spending. But Greek officials have suggested Athens may be willing to consider raising value-added-taxes or other levies to appease the lenders. Locked out of bond markets and with bailout aid frozen since summer last year, Athens is quickly running out of cash. It urgently needs access to funds to avoid defaulting on a €1.6 billion IMF loan that falls due at the end of the month.
Money has drained out of Greek banks after a breakdown in talks last weekend, and Greece might have to impose capital controls within days if there is no breakthrough.
Sources in Frankfurt and in Brussels said the European Central Bank’s board would discuss the liquidity of Greece’s banking sector at 0830 GMT today. The sources said Greek pre-orders for deposit withdrawals for today had already reached one billion euros - after savers pulled over four billion euros out of their banks last week.
European ministers have played down the prospect of a final agreement today but hope a political understanding can be reached in time for a full deal by the end of June. For a deal to work, Tsipras will need a solution that is acceptable to his party or else may be pushed to call a snap election or a referendum to secure a mandate for an agreement.
Meanwhile the mood has also hardened in Germany, which has contributed more money than any other country to bailing out Greece. German Chancellor Angela Merkel is under pressure from within her ranks not to give in to Greek demands, even if that means contemplating Greece leaving the euro zone. Merkel’s Bavarian allies warned against giving in to Greece, with senior Christian Social Union lawmaker Hans Michelbach saying he saw no realistic chance of an agreement today.
“If the EU lets the government in Athens get away with its intransigence, we can bury the euro,” Michelbach said in a statement yesterday.
“Either Greece declares itself willing for a viable solution or the country must leave the euro. The euro zone could cope with the consequences of a Greek exit,” he said.