Greece debt crisis: EU leaders hold critical summit

Greek PM Alexis Tsipras said he hoped Greece would “return to growth within the eurozone”.

But European ministers have said there is still no basis for making a decision for aid for Greece on Monday.

On Sunday, Mr Tsipras set out new proposals to try to prevent a default on a €1.6bn (£1.1bn) IMF loan.

But he has ruled out pension cuts, higher power rates, and an excessive budgetsurplus.

Greece will not accept cuts to pension payments or public sector wages, saying two-thirds of pensioners are either below or near the poverty line

International creditors want pension spending cut by 1% of GDP – it accounts for 16% of Greek GDP. They say they want to target early retirement, not lower-income pensioners

EU officials say Greece has agreed to budget surplus targets of 1% of GDP this year, followed by 2% in 2016 and 3.5% by 2018; Greece says nothing is agreed until everything is agreed

Creditors also want a wider VAT base; Greece says it will not allow extra VAT on medicines or electricity bills

Greece complains creditors focus on increasing taxes instead of cracking down on tax evasion; IMF is concerned Athens is not offering credible reforms

Germany’s Wolfgang Schaeuble said there were “no substantial proposals” from Greece. Arriving for the summit, he told reporters he had not seen anything new from Greece so far and “without anything new, there is nothing for the ministers to prepare for their leaders”

The head of the group of eurozone finance ministers, Jeroen Dijsselbloem of the Netherlands, said it would be “impossible to have a final assessment” as the Greek proposals were very recent, but they would “hopefully [form] the basis for final talks”

Finland’s Alexander Stubb said he did not see a deal being reached on Monday: “We have wasted a lot of air miles, both on the finance ministers’ side and on the prime ministers’ side.”

Irish Finance Minister Michael Noonan said that there had been confusion with several versions of new Greek proposals being discussed. He said it was not clear that there had been enough movement from Greece and that he believed there might have to be another meeting on Thursday

Greece must repay the loan by the end of June or risk crashing out of the single currency and possibly the EU.

Talks have been in deadlock for five months. The European Commission, the IMF and the European Central Bank (ECB) are unwilling to unlock the final €7.2bn tranche of bailout funds until Greece agrees to economic reforms.

The chairman of Greece’s fourth-biggest bank, Nikolaos Karamouzis, warned there was a genuine risk of Greek banks being forced to close their doors tomorrow and cease dispensing cash for days, if there is no deal in Brussels today.

He said that because of the pace of withdrawals of cash from Greek banks by anxious savers – which he said was running at €700m (£501m) a day – all the banks can only keep going thanks to life-saving loans to them made by the Bank of Greece, with approval of the ECB, under the Emergency Liquidity Assistance (ELA) scheme.

There was a serious risk, he said, that the governing council of the ECB would end the ELA scheme, and terminate Greek banks’ full access to the Eurosystem payments arrangements, if there was no sign today that Greece is back on a path to solvency.

In that dire eventuality, all the banks would have to cease trading, as soon as tomorrow. And they could only reopen as and when the Greek government passed legislation to restrict cash withdrawals, or introduce capital controls, which – he said – would take days.

Prime Minister Tsipras is meeting the heads of Greece’s three international creditors in Brussels, ahead of his talks with the leaders of 18 other eurozone nations.

Mr Tsipras’ offer on Sunday of a reforms package to the leaders of Germany, France and the European Commission is seen by some as a sign the Greek government is willing to make concessions.

The proposals, which Mr Tsipras described as “mutually beneficial”, were adopted at an emergency meeting of the Greek cabinet – though details have yet to be revealed.

The deadline for Greece to pay back a slice of its loan is 30 June, but a last-minute deal would make it difficult to arrange the logistics of transferring the money.

Greece-debt-talk-2A separate European Council summit is scheduled for Thursday and Friday, and its agenda is packed.

In theory, if no deal is struck on Monday, there is still a week to get things resolved.

On Monday, the ECB again increased the amount of emergency credit it allows Greek banks to draw on to remain afloat, and may renew the increase in coming days if necessary, banking officials said.

Greek savers have withdrawn billions of euros in recent days, putting the banking system under intense pressure.

But Greek banks opened as normal on Monday following an emergency loan from the ECB on Friday.

Option 1 – No deal: Greece defaults on IMF and ECB repayments; ECB pulls plug on emergency bank assistance leading to run on Greek banks, capital controls and potential Grexit.

Option 2 – Greece agrees reform deal with creditors at last minute and avoids default, staying in euro.

Option 3 – No deal reached but both sides paper over cracks and Greece stays in euro for now.

 

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