Saturday, June 13, 2015

Tsipras Seeks Debt Relief As Greeks Take Offer To Brussels, Senior Officials Discuss Greek Default

Tsipras seeks debt relief as Greeks take offer to Brussels | Reuters

Greek Prime Minister Alexis Tsipras said he was willing to accept unpalatable compromises to secure a deal with international creditors provided he gets debt relief in return, something that Germany refuses to countenance.
With Greece heading towards possible default and bankruptcy, he told his negotiating team before it took a counter-proposal to Brussels that without debt relief he would reject any settlement that isolates his country from the rest of Europe.
In little more than a fortnight, Athens must repay 1.6 billion euros ($1.8 billion) to the International Monetary Fund with money it does not have.
Greek ministers arrived in Brussels on Saturday to resume negotiations on a cash-for-reforms deal with the EU and IMF creditors that ended in stalemate on Thursday.
The counter-proposal offering concessions on budget issues is designed to break the deadlock that is threatening Greece's future in the euro zone.
Tsipras, who was elected in January on promises to end austerity, made it clear he was willing to give ground but with strings attached that German Chancellor Angela Merkel is unlikely to accept.

Tsipras used the term "sustainable solution" to refer to a long-standing demand for large parts of Greece's mountainous debts to be written off or rescheduled - something he believes is vital if the Greek economy is to start getting back on its feet after a six-year depression.
Much of that debt is owed to Germany, the biggest contributor to Greece's 240 billion euro bailouts. Any acceptance by Merkel that the money might never be paid back would almost certainly create uproar among the country's politicians and taxpayers.
EU officials question Greek assertions that the debt is asphyxiating the economy. The government's immediate problems are with repaying loans from the IMF and European Central Bank while privately held debt is relatively modest following a major write-down in 2012.

On Friday, EU officials said representatives of euro zone member states had formally discussed a series of scenarios, including for the first time one which involved a possible Greek default on the repayment to the IMF due by the end of June.
Athens, which attended a meeting of the official-level Euro Working Group on Thursday, has denied that any such scenario had come up.
Defaulting on a repayment to the IMF, the global lender of last resort, would have profound consequences. The ECB would probably have to halt emergency lending that supports Greek banks, which have suffered huge withdrawals by anxious savers.
Athens would then probably have to impose capital controls on deposit withdrawals and payments abroad in a series of events that would put Greece's future in the euro in grave danger.

Eurozone officials have, for the first time at senior level, discussed what would happen if Greece defaults on its payments. 
Officials from the 19 euro countries’ finance ministries, including Greece, discussed the possibility at a meeting in Bratislava on Friday (12 June). 
"It was a preparation for the worst case. Countries wanted to know what was going on”, one official told the AFP news agency. 
A second official said: “A default was mentioned as one of the scenarios that can happen when everything goes wrong”.
Reuters reports they also discussed two other scenarios.
One is that Greece and creditors agree, next week, on which reforms Greece will make in return for €7.2 billion in aid still available in its bailout programme. 
The other is that they agree to extend the bailout, which expires on 30 June. 
An EU official told Reuters the likelihood of the €7.2 billion deal is slim. 
"It would require progress in a matter of days that has not been possible in weeks. The reaction [in Bratislava] of the ECB, the IMF and several member states was extremely sceptical," the official said, referring to the European Central Bank and the International Monetary Fund. 
Greece, also on Friday, filed new reform proposals. 
But according to a copy of the Greek non-paper, leaked online, it falls short of IMF demands on pension cuts. 
It also harrangues the IMF for putting pressure on EU states.

Crunch moment

The crunch moment is here because Greece can’t pay €1.6 billion, which it owes the IMF by 30 June, on its own. 
If eurozone finance ministers don’t agree to help when they meet in Luxembourg on 18 June, there won’t be time, for technical reasons, to help later. 
For his part, Dutch finance minister Jeroen Dijsselbloem, who chairs the euro ministers’ meetings, said in The Hague on Friday that if Greece can't get the IMF on board the deal is off. 
"If the IMF walks out - which they won’t, I'm sure - then part of the programme's financing will be gone and then we no longer have a base”.
“If the Greek government isn’t willing to take difficult measures, even if they’re unpopular, then Greece will never be saved", he added.
"We’ve repeatedly explained to the Greeks how little time there is.” 
German chancellor Angela Merkel said in Berlin: “Where there’s a will there’s a way, but the will has to come from all sides. So it's important that we keep speaking with each other”.


The possibility of Greece defaulting raises the prospect of Greece exiting the euro entirely.
The prevailing wisdom in Europe’s centre-right EPP political family, which counts Merkel as a member, is that financial markets could withstand the impact of a Greek exit. 
But it would create political and security risk. 
Greece holds a veto on many decisions in the EU Council and on all decisions at Nato, with the prospect of an isolated, failing state in either club causing concern. 
Meanwhile, eurozone officials aren’t the only ones discussing a Greek crash. 
Speaking to EUobserver in Brussels on Thursday, Nikola Gruevski, Macedonia's PM, noted: “If that happens, and I hope it doesn’t, there won’t be serious consequences [for Macedonia]”. 
He added: “They [Greece] have two banks in Macedonia and, according to the rules of the central bank in Macedonia ... both banks aren’t able to transfer their capital to their mother banks in Greece”.

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