Greece's
latest attempt to reach deal with creditors collapses
Exit
from eurozone a step closer as EU officials dismiss Alexis Tsipras’s
reforms as incomplete, with talks halted after less than an hour
Helena Smith in
Athens
Last-ditch talks
aimed at breaking the impasse between Athens and its international
creditors have collapsed in acrimony with European Union officials
dismissing Greece’s latest reform package as incomplete in a step
that pushes the country closer to leaving the eurozone.
What had been billed
as a last attempt to close the gap between Alexis Tsipras’s
anti-austerity government and the bodies keeping debt-stricken Greece
afloat was halted late on Sunday after less than an hour of
negotiations in Brussels.
In a tersely worded
statement, the European commission declared talks would resume when
euro area finance ministers gather in Luxembourg on Thursday. The
meeting could be decisive in determining the fate of a nation that is
dependent on bailout funds from the EU and International Monetary
Fund to avert default.
“While some
progress was made, the talks did not succeed as there remains a
significant gap between the plans of the Greek authorities and the
joint requirements of the commission, European Central Bank and IMF,”
the statement said. In fiscal terms, the differences amounted to €2bn
(£1.45bn) a year in permanent budget savings.
The gulf between the
sides prompted a call from the IMF’s chief economist for both sides
to compromise further. Olivier Blanchard said Brussels should be
prepared to delay more of Greece’s debt repayments, accept only
limited reforms and cut the interest applied to debt-relief loans,
while Tsipras should offer further pension reforms and accept that
some VAT exemptions must be dropped.
“On the one hand,
the Greek government has to offer truly credible measures to reach
the lower target budget surplus and it has to show its commitment to
the more limited set of reforms,” Blanchard wrote in his economic
blog. “On the other hand, the European creditors would have to
agree to significant additional financing and to debt relief
sufficient to maintain debt sustainability.”
The intervention by
Blanchard late on Sunday will be widely seen as supportive of the
Greek position, though with the sting for Athens in his call for
pension reform, which Yanis Varoufakis, the Greek finance minister,
repeated on Saturday was a dealbreaker.
With the future of
Greece in the eurozone on the line as never before – and time now
of the essence if Athens is to honour a €1.6bn debt repayment to
the IMF on 30 June – the magnitude of the moment was not lost on
Greek officials or the prime minister’s radical left Syriza party.
Yannis Dragasakis,
the deputy prime minister who flew to Brussels to head talks, said
Athens remained ready to conclude negotiations “with a mutually
beneficial agreement”, suggesting there was still room for
compromise.
Blaming foreign
lenders for the breakdown in talks, he said the Greek government had
submitted complementary proposals that “fully cover” the fiscal
gap and the primary surplus – the two major sticking points between
the two sides.
Creditors, he said,
had insisted on pension cuts and increases in VAT both worth 1% of
GDP – or €3.6bn – to close the projected gap, measures that
Athens regards as untenable for a population already pauperised by
five years of biting austerity. It was the second economic reform
package to be proposed by the Greek government and rejected by
creditors in June.
“Despite the
presence of the Greek delegation in Brussels, there was no response
on the part of the institutions [European commission, ECB and IMF]
for discussions at the same [political] level or authorisations that
would permit a solution to the issues that remain open,” Dragasakis
said in a statement.
Euclid Tsakalotos,
Greece’s chief negotiator, said it was clear “the opposite side
did not have a mandate to negotiate”. He told the Guardian in a
text message: “We made huge efforts to meet them halfway but they
insisted on both pension cuts and the increase in VAT on restaurants
and would not accept closing the gap even partially via
administrative measures to reduce tax evasion, even though this was a
central plank of our electoral programme. Moreover, they told us
bluntly they had no mandate to discuss a compromise! So much for
negotiating.”
With developments
taking such a dramatic turn, opposition parties urged Prokopis
Pavlopoulos, the head of state, to call an emergency meeting of
political leaders. “The country has to remain intact within Europe
and this has to be understood by everyone,” said the centrist
party, To Potami. “We await a responsible reaction from the
political leadership of the country.”
Negotiators, who
included the young prime minister’s closest confidant Nikos Pappas,
were due to return to Greece on Sunday night.
Failure to keep
Greece in the euro, after years of arduous negotiations and two
emergency bailouts totalling €240bn, would send it lurching into
the unknown and mark a historic blow to the EU’s most ambitious
project.
Greek officials flew
to Brussels after Tsipras signalled he would soften his stance and
accept painful compromises in return for promises to alleviate the
country’s staggering debt.
Government sources
had indicated that Athens was “very close” to sealing a deal that
would release more than €7bn in bailout funds the country now
desperately needs to avoid defaulting on loans to the IMF and ECB
over the summer. Creditors have refused to disburse financial
assistance since August as both sides have wrangled over reforms.
A gesture on the
ever-contentious issue of Greek debt would also allow Tsipras to sell
a deal to hardliners in Syriza, which was catapulted into power in
January on a pledge to end five gruelling years of “self-defeating”
austerity, and to Greeks at large.
At more than €320bn,
the equivalent of 180% of the country’s entire economic output,
Greece has the highest debt-to-GDP ratio in the EU with economists
far and wide agreeing it is unsustainable. Following the breakdown in
talks, leftwing militants implored the government not to concede on
any measures that would entail “the extinction of the Greek
people”.
Fears now abound
that Greece could be heading for a Cyprus-style denouement with the
ECB pulling the plug on the emergency liquidity assistance (ELA) it
has been drip-feeding Greek banks. The Frankfurt-based institution
has come under growing pressure to make such a move in recent weeks.
Indicative of the
growing tensions between Athens and Berlin, the biggest contributor
of Greece’s bailout programme to date, Sigmar Gabriel, Germany’s
vice-chancellor and head of the country’s Social Democratic party –
who has long been seen as a friend of Greece – deplored the Greek
government’s negotiating tactics in an article for Monday’s daily
Bild newspaper.
“The game
theorists of the Greek government are in the process of gambling away
the future of their country,” he wrote in an excoriating critique
of Varoufakis, whose academic expertise includes game theory. “Europe
and Germany will not let themselves be blackmailed. And we will not
let the exaggerated electoral pledges of a partly communist
government be paid for by German workers and their families.
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