Greece faces D-Day after bailout talks halted

BRUSSELS, Belgium (UPDATED) – Greece on Sunday, July 12, faced a final EU summit to clinch a deal that would stop Athens crashing out of the euro after divided eurozone ministers halted “very difficult” talks on a new bailout overnight.

Saturday’s (July 11) meeting of the Eurogroup, comprising finance ministers from the 19-nation single currency area, was supposed to pave the way for all 28 European Union leaders to sign a final agreement at an emergency summit the following day, billed as the last chance to keep Greece in the euro.

But skeptical nations demanded more commitments from Athens, amid claims Berlin had drawn up an “internal paper” for Greece to leave the eurozone for 5 years, while Finland reportedly decided not to accept any new rescue plan for debt-laden Greece.

Eurogroup chief Jeroen Dijsselbloem said the “issue of credibility and trust was discussed” by ministers, who are wary of the Greek government’s commitment to enacting the new reforms which closely resemble those rejected by voters in a surprise referendum.

“We haven’t concluded our discussions. It is still very difficult but work is still in progress,” said Dijsselbloem after 9 hours of grueling talks, adding that they would resume Sunday morning at 0900 GMT.

Finnish Finance Minister Alexander Stubb was more upbeat, despite reports that Finland’s parliament has decided it will not allow the government to accept any new bailout deal for Greece.

“We are making good progress,” he said.

EU Commissioner for economic affairs Pierre Moscovici, who has been among the most sympathetic to Greece’s plight, said: “I am always hopeful.”

‘Climate not easy’

Creditor institutions have called a new reform plan from leftist Greek Prime Minister Alexis Tsipras for a third bailout worth more than 80 billion euros ($89 billion) a positive step forward after months of wranglings.

The proposals, including pension cuts and tax hikes, were approved by the Greek parliament in the early hours of Saturday despite opposition within Tsipras’s ruling radical Syriza party.

But Germany’s hardline Finance Minister Wolfgang Schaeuble poured cold water on early optimism at the start of the talks, accusing Athens of repeatedly reneging on its commitments.

“Definitely we cannot trust promises,” Schaeuble said. “In the last months hope has been destroyed in an incredible way, even up to just a few hours ago.”

A European source said the German finance ministry had even drawn up an “internal paper” for Greece to leave the eurozone for 5 years if it fails to improve its bailout proposals, but added it was not distributed at Saturday’s meeting. 

Another source close to the negotiations said the “climate is not easy” and Greek Finance Minister Euclid Tsakalotos was is in contact with Athens to see how to restore eurozone confidence in Greece.

The Athens News Agency, meanwhile, reported that Greek government sources believed “some countries, for reasons that have nothing to do with the reforms and the program, don’t want an agreement”. The sources did not name specific countries.

Even if an agreement is reached, at least eight parliaments will have to weigh in on a final accord, with Germany’s Bundestag having to vote twice.

Debt mountain

Tsipras won the backing of 251 out of 300 deputies in the Greek parliament for his reform plans, even though they are similar to the ones that Greeks rejected in last week’s referendum.

Athens’s creditors fear it will not keep its promises after two previous bailouts worth 240 billion euros merely added to a debt mountain, now worth nearly 180% of the country’s GDP.

Greece dived deeper into the mire when it became the first developed economy to default on a huge payment to the International Monetary Fund on June 30, the same day as its EU bailout expired.

In Greece, there is growing alarm at capital controls that have closed banks and rationed cash at ATMs for nearly two weeks, and Economy Minister Giorgos Stathakis warned the restrictions will likely stay in place for “months”.

Queueing Saturday at a cash machine in Athens, Vassilis Papoutsoglou, 52, said: “We still don’t know what will happen tomorrow. Can we expect something better, or is it Armageddon?”

The Greek government hoped the parliamentary vote would give it a mandate to continue the talks with creditors – but it also revealed the depth of opposition to fresh austerity.

Three senior government figures were among 10 MPs who abstained or voted against, and several others from the ruling leftist Syriza party stayed away, prompting commentators to predict a government shake-up.

Tsipras told parliament the plan was “marginally better” than the proposals put forward by the creditors last month and that Greeks would “succeed not only in staying in Europe but in living as equal peers with dignity and pride”. – Bryan McManus and Danny Kemp, AFP / Rappler.com