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Greece crunch debt talks restart after no late-night deal

Greece crunch debt talks restart after no late-night deal

4 min. 25.06.2015 From our online archive
Greece will restart crunch talks with its creditors on Thursday in a bid to save Athens from default, hours after Prime Minister Alexis Tsipras lashed out at lenders for rejecting his reform plans.

(AFP) Greece will restart crunch talks with its creditors on Thursday in a bid to save Athens from default, hours after Prime Minister Alexis Tsipras lashed out at lenders for rejecting his reform plans.

Talks were due to start at 6am, a European source said, after late-night talks on Wednesday evening ended without a breakthrough as Greece's leaders rejected reforms demanded debtors.

Tsipras was due to resume meetings with the heads of the European Commission, International Monetary Fund and European Central Bank - the "troika" of Greece's main bailout monitors - 7am.

They will try to finalise a deal in time to have it approved at a meeting of eurozone finance ministers later in the day, and then rubber-stamped by national leaders meeting at European Union summit on Thursday and Friday. 

Discussions have become increasingly acrimonious ahead of a June 30 payment deadline and on Wednesday Greece withdrew some of its proposals, apparently for the first time since negotiations began.

Greek government sources said two were withdrawn from the list under pressure from Tsipras's left-wing Syriza party, including an unpopular increase in pensions contributions. The Greek side is seeking to offset the changes financially with other measures, sources said. 

A European source commented there was "hope of an agreement between the (creditor) institutions and Greek authorities" from the talks between Tsipras and the EU-IMF.

The Eurogroup of finance ministers from the 19-country currency union also plan to restart talks on releasing further financial aid for Greece at 11am Thursday after talks the previous night ended only an hour in.

"We have not reached agreement yet, but we are determined to continue our work towards doing what is necessary," Jeroen Dijsselbloem, head of the Eurogroup, told reporters.

'Strange position'

The Eurozone's main stock markets fell Wednesday as initial optimism for a deal faded, with Asian equities continuing the slide on Thursday morning over fears of the global economic fallout if no deal is reached.

Anti-austerity leader Tsipras flew to Brussels early Wednesday for a crunch meeting with European Commission President Jean-Claude Juncker, IMF chief Christine Lagarde and European Central Bank boss Mario Draghi.

But after the talks once again stalled, he lashed out at Greece's creditors over what he said were fresh demands they had made in addition to a reform plan Athens submitted last week to end the five-month standoff.

"This strange position maybe hides two things: either they do not want an agreement or they are serving specific interests in Greece," Tsipras said as he went into the talks.

His government, elected in January, has vowed to end years of austerity imposed under two bailouts worth 240 billion euros, and has resisted demands by creditors for spending cuts and pension reforms.

But the European-IMF lenders have refused to unlock the last 7.2 billion euros of Greece's bailout before it expires on June 30, which Greece needs to pay a 1.5-billion-euro IMF loan repayment on the same day.

EU President Donald Tusk warned last week of the growing risk of a "chaotic, uncontrollable Grexident" - Greece crashing out of the euro and perhaps also the EU, which it joined in 1981.

ECB cash injection

The new plans submitted Sunday by Greece aim to raise eight billion euros, mostly through new taxes on the wealthy and businesses, VAT increases and a cut in defence spending.

But in counter-proposals handed to Greece on Tuesday, creditors are calling for early retirement to be abolished and an increase in the retirement age from 62 to 67 by 2022, not 2025.

They are sticking to demands for a 23 percent value-added tax rate for restaurants, instead of the current 13 percent. Athens is fearful of the consequences to its valuable tourism sector.

Creditors also propose to increase corporation tax to 28 percent from the current 26 percent, instead of the Greek plan to raise it to 29 percent from 2016 onwards.

And they want defence expenditure to be slashed by 400 million euros instead of the proposed 200 million euros.

Greece's banking system has been kept afloat by cash injections from the ECB as wary Greeks withdraw their deposits. On Wednesday it increased emergency liquidity funds for the fifth time in eight days.

Athens has also warned any accord would need to be approved by parliament before June 30, which risks splitting Tsipras's Syriza party, where many on the left wing view him as reneging on campaign promises.

Any Greek agreement will also need to deal with what comes next, with EU officials suggesting an extension of the bailout until the end of the year, followed by a possible third aid package to keep Greece afloat.

The two huge bailouts since the Greek crisis erupted in 2010 have left it with debt totalling nearly 180 percent of its annual economic output.