Greek PM speaks with EU’s Juncker, ECB’s Draghi

30 Jun 2015 | Author: | No comments yet »

Crunch time for Greece as IMF debt looms and bailout ends.

ATHENS—The president of the European Commission approached Greek Prime Minister Alexis Tsipras on Monday night about a last-minute financing deal that would require the government in Athens to campaign in favor of the deal in a referendum, a commission spokesman said. It’s crunch time for Greece, with the European part of its international bailout expiring Tuesday and with it any possible access to the remaining rescue loans that it needs to pay its debts.Athens: Last-minute contacts were underway between Athens and Brussels on Tuesday to try to reach an accord over bailout terms for Greece, a Greek official said, just hours before the package is due to expire. This last minute deal, which would still need to be considered and approved by eurozone finance ministers, would include the budget cuts and policy overhauls that were discussed by negotiators Friday night, when Mr. Without an 11th-hour deal, the government is unlikely to repay a debt of about $1.9 billion to the International Monetary Fund also due Tuesday — a move that would amount to default and would increase fears the country could fall out of the euro currency bloc.

The first document is titled ‘Reforms for the completion of the Current Program and Beyond’ and the second ‘Preliminary Debt Sustainability Analysis’. REUTERS/Alkis Konstantinidis A closed Eurobank branch after the Greek government imposed capital controls at the country’s banks in Athens, Greece June 30, 2015.

But that was not before pressure from the IMF, Europe and other creditors forced Mr Tsipras to shut Greece’s financial market and block citizens from withdrawing money from banks. Both sides had been within a few billion dollars of finding acceptable terms for a deal to allow Greece more time to repay the IMF, World Bank and the European Central Bank, thereby extending the bailouts of the past five years. The costs of not agreeing to a deal in terms of lost market value, economic damage and human suffering far outweigh any concessions required by both sides. But Europe wanted to dictate more precisely what Greece’s elected government can and cannot do to limit the austerity measures creditors have demanded to get the nation’s finances back into shape.

In Brussels, European officials said the Commission chief was willing to help give Tsipras a belated way out of his financial crisis if he accepts creditors’ conditions on the bailout standoff and campaigns for staying in the euro. Tsipras would have to send a written acceptance to creditors’ latest draft by Tuesday and agree to campaign for a “yes” in the referendum planned for July 5.

An EU official, who asked not to be identified because of the sensitivity of the talks, called it “a sort of last-minute offer” before Tuesday’s dual deadlines. Tsipras, who advocates a “no” vote in Sunday’s popular vote, argues that the demands from creditors for further, tougher austerity measures cannot be accepted after six years of recession. As such, Mr Tsipras has been unwilling to cede any more than moderate pension cuts and consumption tax rises, fearing further economic contraction, even if that might avoid a fate even worse. However, on Tuesday morning, the line of communication had changed, with one Greek official saying that Athens “is taking initiatives in order to end the impasse.” According to Greek and European officials Mr. AFP PHOTO / POOL / JULIEN WARNANDJULIEN WARNAND/AFP/Getty Images A bather leaps from a rock into the sea on the coast south west of Athens, Greece, on Monday, June 15, 2015.

In that statement, finance ministers pledged to bring Greece’s debt down to below 110% of gross domestic product by 2022 as long as Athens was implementing the terms of its bailout program. The next few days will tell whether the price of European unity is so great for Germany, France and the other 16 EU nations that they will shift towards Greece’s demands.

The branches will open despite the closure imposed on Greek banks until July 6 and will only serve pensioners and those who can’t withdraw money from automatic cash machines. The banner reads “Greece yes, Troika no” The non-payment of the €1.6bn will be the first time in the history of the IMF that an advanced economy has defaulted on a loan from the world’s financial backstop, putting Athens in the same bracket as Zimbabwe, Sudan and Cuba. On the possibility of an 11th hour aid deal with international creditors – with the current programme expiring on Tuesday – Varoufakis said: “We hope so”.

A day after worried elderly Greeks swarmed banks in the hope they would open, the finance ministry said Tuesday morning it would open about 1,000 bank branches across the country for three days this week to allow pensioners without bank cards to make withdrawals. As stunned Greeks emptied supermarket shelves and petrol stations as they tried to protect themselves from the government’s decision to close banks for a week, talks were underway. “The prime minister’s office has told Brussels that it is evaluating yesterday’s new proposal of the EU Commission President, which included debt relief in October and changes in the EKAS supplement (for low-income Greeks),” the paper reported, without specifying its sources. Meanwhile, irate depositors called in to television stations to report that some ATMs had run out of 20 euro notes, leaving them dispensing 50 euros only.

As Adjunct Professor of Education at the University of Technology, Sydney, James Athanasou wrote in the Herald this week, the Greek crisis “is a social struggle for independence and self-respect. The last-ditch bid from Brussels came after tens of thousands of Greeks, mobilised by Tsipras’ Syriza party, demonstrated in Athens against further austerity. It is about the right of a poor nation to be kind to its citizens.” Voting to accept the bailout terms would condemn Greeks to years more austerity and likely leadership by politicians unwilling to challenge European diktat purely out of fear. However, there was no sign that the leftist leader, elected in January on a promise to end austerity, was prepared to drop his repeated rejections of the terms, which he has branded a “humiliation” for Greece. In the meantime, all our thoughts are with so many Australians of Greek descent who are worried about loved ones struggling to survive in their ancestral homeland, and so deeply concerned for its future.

With a ‘no’, we go into an unknown territory.” “For the other countries in Europe, it would be a problem but not a drama if Greece left, it wouldn’t be an economic upheaval all of a sudden,” Sapin said, calling Monday’s losses on financial markets a simple correction of past gains. While borrowing costs rose for countries like Spain and Portugal, they fell for Ireland in one of the clearest signs yet that investors no longer link our fate to other heavily indebted countries. The fall on the Dublin stock exchange was also smaller than the declines seen in most other countries because so few companies here have any links to Greece. While stocks fell to their lowest levels in eight months and stress measures in financial markets rose, the general view was that the threat of contagion is limited. The relatively muted effect on markets reflects investors’ confidence in firewalls erected to contain the fallout of a potential Greek default during months of debt talks.

Leftist Finance Minister Yanis Varoufakis argues that Athens has had no benefit from the money, which largely went to repay German and French banks which had imprudently lent large sums to successive Greek governments. The Greek economy has shrunk by more than 25 percent since 2009 and unemployment has soared to over 25 percent, including more than 50 percent of young job seekers. While the Tsipras government blames German-driven austerity for this economic disaster, EU officials note that other euro zone countries such as Ireland, Portugal and Spain that received bailouts for the state or banks have carried out similar reforms and returned to economic growth, even if unemployment remains high. Credit ratings agency Standard & Poor’s lowered its sovereign rating on Greece to ‘CCC minus’ from ‘CCC’ late on Monday, saying the probability of Athens exiting the eurozone was now about 50 percent.

Tsipras put his own position on the line in a television interview on Monday evening, saying he would respect the result of the referendum vote but would not lead a government to administer “austerity in perpetuity”. “If the Greek people want to have a humiliated prime minister, there are a lot of them out there. Juncker’s final offer incorporated a proposal from Greece to set value-added tax rates on hotels at 13 percent, rather than the 23 percent in the lenders’ original plan. If the offer were accepted, the euro zone finance ministers could adopt a statement saying that a 2012 pledge to consider stretching out loan maturities, lowering interest rates and extending an interest payment moratorium on euro zone loans to Greece would be implemented in October. The offer would be conditional on a letter to Juncker, Eurogroup chairman Jeroen Dijsselbloem, German Chancellor Angela Merkel and French President Francois Hollande arriving in time to arrange an emergency meeting of the Eurogroup on Tuesday.

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