Greece and its creditors are locked in last-ditch talks, with European Commission President Jean-Claude Juncker trying to broker a deal over the weekend.
Prime Minister Alexis Tsipras sent a delegation to Brussels with a new set of proposals to close differences on pensions, taxes and a primary surplus target. With positions hardening, the talks are Juncker’s last attempt to reach a compromise, according to a European Union official, who asked not to be identified.
Representatives of the International Monetary Fund, the European Central Bank and the European Stability Mechanism are waiting in the wings to join the negotiations if progress is made between Greece’s envoy and Juncker’s chief of staff. The aim is to reach an deal before markets open on Monday, the official said.
European leaders from German Chancellor Angela Merkel to European Union President Donald Tusk have voiced growing exasperation with Greece’s brinkmanship that has pushed Europe’s most-indebted country to the edge of insolvency.
Juncker warned Tsipras on Thursday that the Eurogroup would start making preparations for a Greek euro exit if creditors didn’t approve a last-minute deal, Frankfurter Allgemeine Sonntagszeitung reported on Sunday, without saying how it obtained the information.
Flitting between intransigence and conciliatory overtures, Tsipras has spent four months locked in an impasse with the creditor institutions. The latest Greek counter-proposal is the second in June. The first was dismissed.
Attempt at Compromise
Greek stocks dropped 5.9 percent on Friday, with bank shares dropping 12 percent, as talks remained deadlocked. The yield on Greek 2017 bonds rose 137 basis points to 20.03 percent. U.S. and European equities and the euro-area’s higher-yielding bonds also tumbled amid growing concern Greece will run out of time for reaching a deal to stave off default.
The IMF spiked an attempt by Juncker to broker a compromise allowing Greece to defer 400 million euros ($451 million) of cuts in small pensions if it reduced military spending by the same amount, Frankfurter Allgemeine Sonntagszeitung reported, citing unidentified people with knowledge of the negotiations. The EU declined to comment on the report.
The talks are difficult and positions are still far apart, an EU official said on Sunday, speaking on condition of anonymity. Senior European Commission officials are worried whether an agreement can be reached on time, the official said.
Seeking Debt Relief
This must “be the last negotiation taking place in crisis conditions,” Finance Minister Yanis Varoufakis said in an interview broadcast Sunday on Alpha TV. “The target of the negotiation is to get out of the crisis. For that you need Greece to go back to markets, so a restructuring of the debt is needed.”
Greece won’t sign up to a fiscal plan that doesn’t work, Varoufakis said. While a primary budget surplus of 1 percent of gross domestic product was achievable in March, a deterioration of the economy since then means that it isn’t any more, he said.
Merkel told Tsipras it’s time to accept the framework for financial aid. Greece’s bailout extension expires June 30 and some national parliaments need to ratify any agreement before funds can be disbursed, which narrows the window for a deal.
“Where there’s a will there’s a way, but the will has to come from all sides,” Merkel said earlier this week. “That is why I think it’s right that we talk to each other again and again.”
Not everyone was good at hiding their frustration. Earlier in the week, Tusk rebuked Tsipras for dragging his feet on a debt agreement and the IMF team left Brussels, voicing despair over Greece’s tactics.
“If the Greek government isn’t willing to take difficult measures, even if they’re unpopular, then Greece will never be saved,” Dutch Finance Minister Jeroen Dijsselbloem, who leads the euro-area finance chiefs’ meetings, told reporters in The Hague on Friday.
Speculation on a Greek exit from the euro area is “exceptionally dangerous,” and such an outcome would have unpredictable consequences, Austrian Chancellor Werner Faymann said in an interview in Real News.
Whatever the outcome, the government won’t call snap elections or a referendum, Tsipras told his team on Friday, according to a statement from the government.
“If we have a sustainable agreement, however heavy the compromises, we will lift the weight,” Tsipras said. “Our only criteria is exit from the crisis and the memorandum of servitude. But if Europe wants division and a continuation of servitude, we will refuse.”