Greece, creditors to discuss new plan as bailout to expire

World Today

Greece’s Finance Minister Yanis Varoufakis is surrounded by media as he leaves from his office in Athens, Tuesday, June 30, 2015. Greece is set to become the first developed nation to not pay its debts to the International Monetary Fund on time, as the country sinks deeper into a financial emergency that has forced it put a nationwide lockdown on money withdrawals. (AP Photo/Daniel Ochoa de Olza)

Greece and its European creditors are to discuss a last-minute proposal by Athens for a new two-year rescue deal, submitted just hours before the country’s international bailout expires and it loses access to billions of euros of European funds.

At midnight central Europe-time, the country is also set to become the first developed nation to not pay its debts to the International Monetary Fund on time, as Greece sinks deeper into a financial emergency that has forced it put a nationwide lockdown on money withdrawals.

The crisis worsened over the weekend after Prime Minister Alexis Tsipras called a referendum for Sunday on creditors’ proposals for reforms in return for bailout loans. That increased fears the country could soon fall out of the euro currency bloc and Greeks rushed to pull money out of ATMS. Tsipras is advocating a “no” vote.

Greece’s latest offer involves a proposal to tap Europe’s bailout fund — the so-called European Stability Mechanism, a pot of money set up after Greece’s rescue programs to help countries in need.

The prime minister’s office said the proposal was “for the full coverage of (Greece’s) financing needs with the simultaneous restructuring of the debt,” but provided no further details.

Jeroen Dijsselbloem, the eurozone’s top official, said the eurozone’s finance ministers would have a teleconference Tuesday evening to assess the proposal.

Speculation had grown over the day that an 11th-hour deal might be possible, and markets edged up, though cautiously.

On Monday, European Commission President Jean-Claude Juncker made a last-minute offer. Under that proposal, Tsipras would need to write to Juncker and other leaders saying he accepts the creditors’ offer, which was on the table last weekend. He would also have to change his position on Sunday’s referendum.

Beyond accepting the creditors’ proposal, Commission spokesman Margaritis Schinas said the offer would also involve unspecified discussions on Athens’s massive debt load of over 300 billion euros and around 180 percent of GDP. The Greek side has long called for debt relief, saying its mountainous debt is unsustainable.

Earlier, German Chancellor Angela Merkel had dampened hopes of a quick deal to extend the existing bailout.

“The program runs out tonight, at exactly midnight central European time,” Merkel said in Berlin. “I know of no solid indications to the contrary.”

However, she had said talks could continue with Athens even after the deadline.

“Of course, we are not going to cut off our channels of communication after midnight tonight,” Merkel said. “That means that the door is open for talks, but that is all I can say at this hour.”

A Greek government official said Tsipras had spoken earlier in the day with Juncker, European Central Bank chief Mario Draghi and European Parliament president Martin Schulz. The official, who spoke on condition of anonymity in line with government regulations, didn’t reveal what was said.

Meanwhile, Greece is expected to miss a 1.6 billion euro ($1.9 billion) debt repayment to the IMF due Tuesday. Finance Minister Yanis Varoufakis, asked whether Greece would make the repayment, replied: “no.”

If Greece doesn’t pay, it will be officially in arrears and will no longer have access to funding from the body until it pays its debt. This, IMF chief Christine Lagarde told the BBC last week, has “never happened in the case of an advanced economy.”

EU officials said Greece would lose access to more than 16 billion euros ($18 billion) in financial support once its bailout expires. The officials spoke on condition of anonymity because contacts about the program were still ongoing.

Greece can apply for some other form of assistance but this could take days, even weeks, to organize. An assessment would first have to be made on whether Greece is eligible, what kind of terms the new package would function under, and the kinds of reforms that Athens would undertake in return.

European officials and Greek opposition parties have been adamant that a “no” vote in Sunday’s referendum will mean Greece will leave the euro and possibly even the EU.

The government says this is scaremongering, and that a rejection of creditor demands will mean the country is in a better negotiating position.

On the streets of Athens, long queues formed again at ATM machines as Greeks struggled with the new capital controls imposed Monday, after a bank run over the weekend following the referendum announcement.

Cash withdrawals have been limited to 60 euros ($67) per day. Banks are to remain shut until at least next Monday.

The elderly have been hit particularly hard, with tens of thousands of pensions unpaid as of Tuesday afternoon. Many also found themselves completely cut off from any cash as they do not have bank cards.

The finance ministry said it would open about 1,000 bank branches across the country for three days from Wednesday to allow pensioners without bank cards to make withdrawals. But the limit would be set at 120 euros for the whole week, rather than the 60 euros per day allowed for those with bank cards.

The crisis has roiled global markets as investors fret over the repercussions of a Greek debt default and its exit from the euro — developments that could derail a fragile global economic recovery, as well as raise questions over the long-term viability of the euro currency.

Story by the Associated Press


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