Greek Prime Minister Alexis Tsipras said the time has come to reach a deal with creditors as his latest proposal to break the funding impasse drew cautious optimism from European officials ahead of marathon talks on Monday.
“We’re are coming to these discussions aiming to strike a financially sustainable agreement,” Tsipras told reporters ahead of a meeting in Brussels with European Commission President Jean-Claude Juncker.
The new plan includes eliminating early retirement options as of next year, hiking the sales tax, increasing tax surcharges that middle- and high-income earners pay and introducing a levy on companies with annual net income of more than 500,000 euros ($568,000), according to a Greek government official who asked not to be identified because the proposals are not public.
With the clock running toward a June 30 deadline to make International Monetary Fund payments and work out a new aid deal after months of fruitless negotiations, Tsipras will have to convince creditors that he’s ready to compromise on election promises and avoid a default. With its finances in tatters and bank deposits dropping at a dizzying pace, it’s unclear how long Greece can hold out without a fresh infusion of rescue loans.
“France and Germany are doing everything to keep Greece in the euro zone,” French President Francois Hollande told reporters in Paris ahead of the summit. “If we can’t reach a full accord tonight we must at least lay the basis for an accord in the coming days.”
Greek bonds and shares rallied on Monday on confidence that a deal is within reach. The Athens Stock Exchange rose 8.7 percent at 1:27 p.m. local time, erasing most of last week’s losses, when it dropped 11.3 percent. The yield on bonds maturing in 2017 dropped 476 basis points to 24.1 percent while the 10-year bond yield dropped 147 basis points to 11.2 percent.
Even if Tsipras reaches a tentative agreement on Monday, appproval is still uncertain because he would need the parliament’s support and his own Syriza party came to power by opposing austerity measures such as cuts in pensions. A deal to unlock aid from the current bailout package would also only serve as a stop gap measure, with many saying Greece will need additional funding already later this year.
An IMF official said that creditor institutions are still assessing Greece’s latest plans and it’s too early to say whether they are sufficiently credible to break the deadlock. The official asked not to be named as the person wasn’t authorized to speak publicly on the matter.
“We have made progress over the last few days, but we are not yet there,” Juncker told reporters in Brussels. “I don’t know if we will have an agreement today.”
Ahead of Monday’s emergency summit, Tsipras is sitting down with Juncker, IMF Managing Director Christine Lagarde, Eurogroup head Jeroen Dijsselbloem, European Central Bank President Mario Draghi and European Council President Donald Tusk. European Union leaders will also hold a regularly scheduled meeting this Thursday and Friday.
With time and money running out for a solution to avert a devastating default, the ECB Monday approved additional emergency funding for Greek lenders which have been bleeding deposits at a record pace, according to a person familiar with the matter. The person, who asked not to be named as such decisions aren’t public, said the ECB will assess again emergency funding for Greece’s banks whenever necessary.
“So far the problem has been that the two sides have not been converging,” Athanasios Vamvakidis, head of G-10 foreign exchange strategy at Bank of America Merrill Lynch, said in a Bloomberg TV interview. “A success for today will be if they reach an understanding for what needs to be done for a deal. The next steps will be for the technical discussions to finalize all the details to make sure they add up.”