Embattled Alexis Tsipras faces down Leftist mutiny amid snap Greek election fears

1 Jun 2015 | Author: | No comments yet »

Embattled Alexis Tsipras faces down Leftist mutiny amid snap Greek election fears.

ATHENS (Reuters) – Greece and its creditors were continuing talks on a cash-for-reforms deal but are expected to miss a self-imposed Sunday deadline for reaching an agreement to unlock aid, sources close to the talks said.Greece’s Prime Minister Alexis Tsipras has attacked its creditors for insisting on what he described as absurd reforms which have only held up progress in negotiations for a deal aimed at preventing his country from defaulting. “The lack of an agreement so far is not due to the supposed intransigent, uncompromising and incomprehensible Greek stance,” Mr Tsipras wrote in a column published by French newspaper Le Monde. “It is due to the insistence of certain institutional actors on submitting absurd proposals and displaying a total indifference to the recent democratic choice of the Greek people,” he added.Greece’s hopes of sealing an accord with its creditors by the end of May dimmed on Sunday, as disagreements between the two sides on budget targets persisted, a person familiar with the matter said.

The extreme “Left Platform” faction of Syriza, who make up a third of the party’s membership, have promised to defy creditor powers, and called for a reinstitution of the drachma, as the government enters its fifth month of arduous bail-out negotiations. However, a deal has so far proved elusive as the creditors are demanding greater reforms in return for the cash, which Mr Tsipras’s government – elected on an anti-austerity bill – has refused to match. Syriza member Stathis Kouvelakis, who has led the insurrection, has vowed to end his country’s ritual “humiliation” at the hands of the International Monetary Fund, European Commission, and European Central Bank. “It has become now clear that the ‘institutions’ are not striving for what some are calling an ‘honourable compromise’” said Mr Kouvelakis, in a statement. “What the ruling circles of the EU, the ECB and the IMF are ruthlessly and consistently aiming for in the last for months, is to strangle the economy, to milk even the last euro from the country’s reserves and to push an “unprotected” government to full submission and exemplary humiliation,” added Mr Kouvelakis. These include a special tax on the very wealthy, greater efforts towards clamping down on tax evasion, and putting broadcasting and other licences up for tender.

The standoff over the terms attached to emergency loans has triggered a liquidity squeeze and record deposit withdrawals, tipping the economy back into recession. “The positive statements from Athens are necessary to mitigate the pressure on deposit outflows,” said Ricardo Garcia-Schildknecht, an economist at UBS AG. “Our baseline view remains an agreement, but negotiations are set to remain difficult, with more pressure probably needed.” With negotiations now in their fifth month, creditor institutions are seeking concrete action in areas including the pension system, labor market and sales tax. They insisted MPs would only vote in favour of a bail-out deal which includes debt restructuring, lower budget targets and an investment programme for Greece’s crisis-hit economy. In an interview published in newspaper Corriere della Sera on Sunday, Greek Economy Minister George Stathakis said he expected a deal in “a few days”, followed by a meeting of euro zone finance ministers to approve disbursement of the aid. The motion was narrowly voted down by 20 votes after a number of abstentions. “Stepping out of the monetary union will be a shock”, said Costas Lapavitsas, a Syriza MP and London academic. “But a new narrative must be reached, with a national currency that gives us our own dimension.” Holding only a 12-seat majority, failure to ratify an agreement would trigger a snap election and likely lead to an extreme Left breakaway, said Miranda Xafa, a Greek economist and senior scholar at the Center for International Governance Innovation. “There are indications that Mr Tsipras is ready to ditch his extremists should he lose a vote, but it will be very hard for him to come up with a face saving deal,” said Ms Xafa.

Asked whether the debt payment to the IMF on June 5 was at risk and there was a question of lumping it together with other instalments that fall due next month, Stathakis said: “There shouldn’t be any need. Mr Tsipras and Mr Varoufakis will have to pass any deal by their domestic rebels Syriza swept to power with a mandate to end austerity and retain the euro in late January. With the European Central Bank’s bond-buying program, or quantitative easing, no longer fueling the market, Europe is at risk from Greek pain, said Ilya Feygin, Managing Director at WallachBeth Capital. “The uncertainty and delay in the Greek agreement, coming after optimistic comments earlier in the week, definitely hurt all European markets on Thursday,” he said by e-mail on Sunday. “A negative outcome in the Greek negotiations would come at a very bad time for Europe with economic data on the weak side and QE no longer pushing down the euro and bond yields.” Government spokesman Gabriel Sakellaridis had told reporters in Athens on May 28 that a deal with creditors could be reached by Sunday. “This optimism is not just words, it is based on the experience of the previous weeks and the progress achieved,” Sakellaridis said.

But Mr Tsipas has failed to extract concessions from his country’s paymasters having agreed in principle to extend Greece’s bail-out programme in February. In a sign of greater willingness to compromise, Interior Minister Nikos Voutsis said on Saturday that Greece was open to pushing back parts of its anti-austerity programme to reach a deal this week.. With the coffers all but empty, Greece’s premier has maintained he will not cede ground over Syriza’s’ “red lines” of VAT hikes, pension reforms, and labour market cuts. “In any new election scenario, Syriza would be split and the Left wing would likely break off to form a separate party. With just four weeks before a euro-area-backed bailout expires, Finance Ministry officials have told Greece there’s not time to get a disbursement approved by the currency bloc’s parliaments unless they reach at least a technical agreement by the beginning of June.

Tsipras is expected to have a teleconference with German Chancellor Angela Merkel and France’s President Francois Hollande later on Sunday – his second in four days – in a bid to help close the deal, a Greek government official said. New Democracy, the main but much depleted opposition party, have said they will wait for the details of any agreement before making a decision on ratification. Tsipras has long sought a political push to end negotiations and get aid flowing to his cash-strapped country, though the lenders have insisted that Greece must wrap up talks at the technical level with adequate concessions on reforms so that its budget and debt numbers add up.

Latest polling shows the Leftist party holds a 26-point lead over pro-euro New Democracy. “There is no political support for increased austerity and there is a belligerent reluctance to give into more demands of creditors,” said Gabriel Sterne at Oxford Economics.

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