European finance chiefs said they were unlikely to strike a deal on the outlines of a third Greek bailout, threatening to delay the cash infusion Prime Minister Alexis Tsipras desperately needs.
While a hardline group led by Germany resisted another rescue, the worst-case outcome was off the table for now. A Sunday meeting of the 28 European Union leaders was canceled; most of the procedures to push Greece out of the euro require their unanimity. A summit of the 19 euro-area leaders was still on, meaning they’ll decide whether to start negotiations on aid.
“If this was a negotiation from one to 10, I think we’re still standing somewhere between three and four,” Finnish Finance Minister Alexander Stubb, who has opposed a bailout, said before the Sunday talks. “We’re very far away” from a deal.
The gathering of finance chiefs in Brussels deadlocked over Greece’s growing debt and the credibility of reforms that some said rely too heavily on taxes. Creditors concerned that Greece can’t be trusted want lawmakers in Athens to pass tax increases and spending cuts into law before negotiations on a bailout package begins.
“If the Greek government commits to implement and vote now -- without delay -- strong reforms in the short term, there is the basis of negotiations,” EU Economic Affairs Commissioner Pierre Moscovici said.
Time and cash are running out for Tsipras, whose banks have been shut for the past two weeks. Bank withdrawals are limited to 60 euros ($67) a day, pensions have been rationed and commerce is grinding to a halt. The European Central Bank has frozen its emergency credit line to Greek lenders.
The weekend standoff came after Tsipras won overwhelming support in the Greek Parliament for a package of spending cuts, pension savings and tax increases intended to win financial aid of at least 74 billion euros. Among its shortcomings, the proposals failed to reflect the economic deterioration since talks collapsed and capital controls were imposed two weeks ago, according to Dutch Finance Minister Jeroen Dijsselbloem, the head of the Eurogroup.
The combination of political and economic hurdles mean “it’s not possible to reach a deal today,” Slovakia’s Peter Kazimir said.
The alternative idea, a Greek exit from the euro, has been floating around the past 24 hours since Frankfurter Allgemeine Sonntagszeitung newspaper reported Germany’s idea of a five-year “timeout” for Greece from the currency union.
While the notion was dismissed by a European Union official, German Vice Chancellor Sigmar Gabriel called it “conceivable,” though “this proposal would only be achievable if the Greek government itself views it as the better alternative.”
German demands have frayed tempers among euro countries.
“Now that Tsipras has made proposals substantially in line with the European requests, an agreement absolutely has to be reached,” Italian Prime Minister Matteo Renzi was quoted as saying by Messagero newspaper Sunday. “You can’t humiliate a European partner.”
The struggle for common ground has grown even tougher since Greece missed a payment to the International Monetary Fund on June 30 and allowed its second rescue package to lapse the same day.
A new bailout would be Greece’s third in five years. In the meantime, its economy has shrunk by about a quarter, leaving its debt burden even higher as a share of the economy than it was in 2010. The aid now would be largely recycled to repay the earlier rescue loans.
“We were told that Greek debt was at 125 percent but we are now being told that this debt has spiraled to 200 percent and that is alarming, raising even more questions about its sustainability and a solution,” Maltese Finance Minister Edward Scicluna told reporters.
While Greek government bonds rallied on Friday on optimism Tsipras’s package would lead to a deal, debt issued by its four largest banks remained below 40 cents on the euro, according to data complied by Bloomberg.
The prices suggest investors expect banks to restructure debt after the country’s economic crisis spurred depositors to withdraw about 40 billion euros between December and June.
The finance chiefs also rebuffed any talk of debt relief, a step that the IMF has backed.
The country’s three creditor institutions -- the IMF, the European Commission and the European Central Bank -- earlier assessed the program positively as a basis for the bailout, according to a euro-area official who spoke on condition of anonymity.
Tsipras faces political antagonists not just in Berlin and Brussels but within his own party. More than a dozen Syriza members refused to back the plan, with some of them denouncing the harsh measures it prescribes less than a week after Tsipras won an anti-austerity referendum. The prime minister said after the vote that his priority would be to complete negotiations with the creditors on a bailout deal.
“It could have been better,” Spain’s Luis de Guindos said as he left Saturday’s talks. “But it could have been worse.”