Europe closes in on Greece debt deal

BRUSSELS, Belgium – Eurozone leaders said they hoped to finally seal a Greek bailout deal this week to save Athens from default and a possible exit from the euro, but Germany warned that more hard work was needed.

After an emergency summit in Brussels, they ordered their finance ministers to hold fresh talks on Wednesday, June 24, to thrash out the details ahead of a full meeting of all 28 EU leaders on Thursday, June 25.

Global stocks surged on signs of a potential breakthrough, which came after Greece submitted an eleventh-hour reform plan to free up crucial funds from its EU-IMF bailout.

European Commission chief Jean-Claude Juncker said he was "convinced" they could end the 5-month stand-off with the leftist Greek government led by Prime Minister Alexis Tsipras.

"I'm convinced that we will come to a final agreement in the course of this week, for the simple reason that we have to find an agreement this week," Juncker told a press conference.

French President Francois Hollande also said a deal was within reach.

"We are moving towards an accord," Hollande told reporters. "There is still work to be done... every effort must be made so that when eurozone finance ministers meet Wednesday, a solution is in sight."

Merkel warns more work needed

But powerful German Chancellor Angela Merkel said that while Greece's plans were a "good starting point for further talks", it was also clear that "absolutely intensive work is necessary now."

Merkel also ruled out any question of debt reduction, as Greece has demanded, and also said the leaders had not discussed any possible extension of the Athens bailout.

Hardline International Monetary Fund chief Christine Lagarde said they were "long on work and short on time" to reach a deal.

The Greek proposals were a last-ditch bid to unlock the final 7.2 billion euro tranche of its aid plan, which creditors have refused to release unless Greece agrees to more austerity measures.

Cash-strapped Greece is at risk of defaulting on a 1.5-billion-euro ($1.7-billion) IMF payment on June 30 if it fails to get a deal to extend its international bailout by the same day.

Radical Syriza party leader Tsipras said that the "ball is now in the court of the European authorities", who have until now always insisted that it is up to Greece to make concessions.

The Greek premier has balked at making more of the spending cuts that have led to five years of hardship for many Greeks, insisting that pensions and VAT hikes are red lines.

In Athens around 7,000 people gathered in Syntagma square on Monday night, June 22, to protest in favor of keeping Greece in the euro.

EU President Donald Tusk warned of the consequences of failure for the 19-country currency union, including the possibility Greece could crash out of the euro and maybe even the EU itself.

"The most important thing is that the leaders take full responsibility for the political process to avoid the worst case scenario, which means uncontrollable, chaotic 'Grexident'," Tusk said, using the term for a failure to prevent Greece leaving the euro.

Tusk confirmed that the new Eurogroup meeting of eurozone finance ministers would be held on Wednesday "so that the Eurogroup can achieve results ... that can be presented Thursday morning."

Sticking points

EU sources told Agence France-Presse that Greece had now met 90% of the conditions set by its creditors.

One remaining sticking point was over Greece's proposals for VAT measures that would raise an extra 0.75% of Greece's gross domestic product, which the creditors say should be at 1.0%. The creditors suggested Greece increase VAT on hotels and restaurants from 13% to 23%.

"Food is a basic necessity, but not restaurants which rely heavily on foreign tourists," a source told Agence France-Presse.

Tsipras also met IMF chief Christine Lagarde and ECB head Mario Draghi before the leaders' summit.

Growing fears of a bank run in Greece amid a huge outflow in deposits prompted the ECB on Monday to inject more emergency funding into Greek banks to cover withdrawals.

Several demonstrations backing Greece's stand against more austerity measures were held in European capitals including Brussels, Berlin, Rome and Paris over the weekend.

Failing a deal, Greece is likely to miss the IMF payment of around 1.5 billion euros, setting up a "Grexit" from the eurozone, which Greece's central bank has said could also see it cast out of the EU.

The EU's involvement in Greece's bailout, which was to provide 240 billion euros in loans in exchange for drastic austerity measures and reforms, runs out at the end of this month, but IMF support is scheduled to continue to March 2016. – Danny Kemp and Alex Pigman, AFP / Rappler.com