Tsipras Asks for Euro Summit in 2015 Redux as Review Stalls

Updated on
  • Government says Tsipras to hold call with EU's Tusk Wednesday
  • Talks between Greece and bailout auditors not yet bridged gap

Greek Prime Minister Alexis Tsipras will seek a meeting of euro-area leaders to resolve disagreements between the government and creditors, a move echoing last year’s drama when a quarrel over bailout terms almost pushed the country out of the currency bloc.

Tsipras is due to call European Council President Donald Tusk on Wednesday morning local time to ask that a euro summit be convened, a Greek government official said in a text message to reporters. The aim of the meeting is to confirm that the latest review of the bailout terms is in line with what was agreed in July 2015, the official said, asking not to be identified in line with policy.

The message was released late Tuesday a few hours after euro finance ministers canceled plans to hold an extraordinary meeting on April 28 to pave the way for a disbursement of the next tranche of emergency loans to Greece and start discussions about official sector debt re-profiling. More time is needed to hammer out issues including a contingency package of austerity measures and the ministers will reconvene at a later stage, Michel Reijns, a spokesman for Eurogroup president Jeroen Dijsselbloem, said in a Twitter post.

“Time pressures are again impacting negotiations over the country’s bailout review, with the whole surrounding feeling as if little has changed since last year,” Paris Mantzavras and George Grigoriou, analysts at Athens-based Pantelakis Securities, wrote in a note to clients Wednesday. Tsipras’s summit proposal “is unlikely to fly, so there is an eerie resemblance to the 2015 negotiations.”

Greece is at loggerheads with creditors over a demand to preemptively legislate belt-tightening measures equal to 2 percent of gross domestic product, which would kick in automatically if the government falls short of the budget targets envisaged in its bailout accord. The latest assessment of its aid terms is already six months behind schedule, raising renewed doubts about whether it will secure emergency loans soon enough to avert a default in July when bonds held by the European Central Bank come due.

Last July, facing the risk of a banking-system collapse following a referendum he called against austerity, Tsipras abandoned his campaign pledges and accepted creditor demands in exchange for a third bailout program. This year, with polls showing a lead for the pro-European opposition New Democracy party, Tsipras’s options to call another referendum or new elections look limited, and may leave him with little choice but to accept what’s on the table rather than risk a damaging showdown for Greece’s battered economy.

The Athens Stock Exchange fell 4.5 percent at the beginning of trading Wednesday. Greek two-year debt jumped 127 basis points as of 11:16 a.m. in Athens, where technical talks between Greece and creditors continued.

Dijsselbloem had previously said a meeting could be held Thursday if Greece agreed on the implementation of so-called contingency measures and a reform package. The two sides have already agreed on “95 percent” of upfront measures equal to 3 percent of Greek GDP, according to Dijsselbloem, who is also finance minister for the Netherlands.

The International Monetary Fund is insisting Greece legislate contingency measures in order to unlock aid, something the nation has said is unconstitutional. Greece has made a counter-proposal, saying it would create a permanent budget correction mechanism, to be activated in case of deviations from targets. Talks in Athens on Tuesday between the Greek government and officials from the IMF, the European Commission, the European Central Bank and the European Stability Mechanism failed to bridge differences.

Tsipras rode to power in January 2015 railing against austerity and nearly steered Greece out of the euro before flip-flopping last summer to secure the nation’s third bailout in six years. In that time, the Greek economy slipped back into recession, capital controls were imposed to stem a run on bank deposits and public support for the euro has weakened.

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