Greek Prime Minister Alexis Tsipras is in Brussels for what could be a last chance to secure a rescue from European leaders and keep his country in the euro.
After German Chancellor Angela Merkel said “time is running out” for Greece to come up with a plan, finance ministers gathered for talks with division remaining over what they were willing to accept. Leaders are then scheduled to convene at 6:30 p.m. Brussels time.
Europe’s most indebted country is closer than ever to an exit from the euro zone, with banks low on cash and creditor nations led by Germany running even lower on patience. Without significant new funds from the European Central Bank, Greek lenders -- already shuttered since June 26 -- will have to remain closed indefinitely, strangling the country’s economy.
“The Greek government has fought with great success that it does not want a program,” German Finance Minister Wolfgang Schaeuble said before the meeting. “But without a program there is no possibility within the frame of the euro zone to help Greece.”
Among options mooted earlier on Tuesday was a bridging loan for Greece to meet payments before a new deal can get through parliaments. Finnish Finance Minister Alexander Stubb said that’s not being looked at for now.
Tsipras is also seeking some form of debt relief. While Irish Finance Minister Michael Noonan said on his way into the meeting that it could be part of a solution, his Slovak counterpart said it was a red line for him.
“Greece was in the last-chance saloon some time ago,” said Nicholas Spiro, the managing director of Spiro Sovereign Strategy, an advisory firm in London. “In order for there to be some sort of a deal to keep Greece in the euro zone, both Athens and Berlin would need to shift their stances dramatically in a matter of hours.”
Tsipras blindsided European partners by walking out of bailout talks on June 26 to call a referendum on more austerity. Sixty-one percent of voters said “no” to measures under negotiation that included curbs on early retirement and sales-tax increases in exchange for new money.
European leaders characterized the vote as a plebiscite on membership in the euro itself, though Tsipras insists Greece can and will stay in. One European official who asked not to be identified said today’s meeting was a final chance for a deal.
To be sure, a “Grexit” is by no means inevitable. French Prime Minister Manuel Valls said his country will do “everything” to keep Greece in the euro, a position shared by Jean-Claude Juncker, the European Commission president. U.S. President Barack Obama has also urged compromise.
A Greek departure would also probably be a gradual process, rather than a single transformative event, with European countries looking to manage the transition to minimize humanitarian and economic fallout.
For now, Merkel and other European leaders hold most of the cards in negotiations.
Financial markets have reacted moderately each day to the Greek turmoil. The euro was down 1.2 percent to 1.0929 as of 2:07 p.m. in London. The Stoxx 600 index dropped 0.2 percent.
The European Central Bank tightened the screws on Greece late Monday by making it harder for its banks to access the emergency loans that have kept them afloat, and keeping the level of assistance at the equivalent of a drip feed. The country’s bank closure and capital controls have been extended through Wednesday to stem withdrawals.
European leaders have all made clear the onus is on Greece to explain how it plans to pull itself out of the crisis. Merkel called the offer from creditors before Tsipras called the referendum “very generous,” while Juncker described the question put to the Greek people “irrelevant.”
Merkel has to contend with a German public becoming increasingly frustrated with the Greek stance. Bild, Germany’s biggest selling newspaper, urged Merkel to remain tough and offer “no new billions for Greece.”
“Today we need the Iron Chancellor,” ran the tabloid’s front page headline, alongside a picture of Merkel in a Bismarck-style army helmet.
Greece made a pre-emptive concession to creditors with the resignation of outspoken Finance Minister Yanis Varoufakis, who had clashed with his counterparts from other countries, especially Schaeuble. Varoufakis was replaced with Euclid Tsakalotos, a long-time ally of Tsipras who shares Varoufakis’s politics, though not his combative style.
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