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06/12/2016

Eurogroup on Greek crisis breaks up after 90 minutes

Euro & Finance

Eurogroup on Greek crisis breaks up after 90 minutes

Eurogroup President Jeroen Dijsselbloem.

(European Parliament)

Eurozone finance ministers tonight (24 June) broke up their meeting to thrash out a deal to save Greece from possible exit from the eurozone, after 90 minutes and with no agreement.

The Eurogroup will meet again at 1pm tomorrow, said President Jeroen Dijsselbloem. Until then negotiations will continue between ambassadors, diplomats and officials from Greece’s creditors in a bid to reach a compromise.

It was hoped that a deal would be brokered tonight, so it could be presented to EU leaders at their European Council in Brussels tomorrow. That summit is scheduled to start at 4pm.

The Eurogroup met after Greek Prime Minister Alexis Tsipras held over six hours of talks in Brussels with the heads of his country’s creditors: the European Commission, International Monetary Fund (IMF) and European Central Bank.

A so-called “staff level agreement” by officials from all three members of the “troika” on the review of Greece’s current bailout plan is needed to unlock funds.

Creditors have refused to release the final €7.2 billion tranche of its international bailout, unless Greece agrees to more austerity measures.

Without the bailout cash, Greece will be unable to meet a €1.5 billion IMF payment on Tuesday (30 June). A default could send Athens crashing out of the single currency and possibly the EU.

But agreement could not be reached before the Eurogroup met, leading to finance ministers adjourning the meeting until tomorrow. The main points the creditors are unhappy with include measures on military spending, corporate taxes and sales taxes.

>>Read: Greek negotiations reach new deadlock

Tsipras is set to meet Commission President Jean-Claude Juncker at 11pm for further talks.

Greek negotiators “do not agree” with their creditors’ latest proposals for a deal, saying they weighed unfairly on workers and pensioners. A Greek government source said that the latest measures suggested by Greece’s IMF and EU creditors “spare the richest” Greeks from shouldering enough of the burden.

The suggestions notably include more restrictive conditions on pensions and higher hikes in value-added tax than Athens had proposed at the beginning of this week. EU and IMF creditors have also proposed lower corporation tax than Athens, 28% as opposed to Athens’ suggestion of maintaining the current rates of 26% to 29%.

Emergency meeting

The Greeks submitted a last ditch plan, scrutinised by eurozone leaders at an emergency summit on Monday and under negotiation today. It focused on VAT rates, early retirement measures and tax hikes, and narrowing the country’s budgetary gap.

>>Read: Hopes raised but Greek debt relief remains sore point

Before the meeting, finance ministers criticised Greece, which put forward two last minute proposals overnight on Sunday.

Finland’s finance minister Alexander Stubb said Greece had still not put a real proposal on the table.

Slovakia’s Finance Minister & Deputy Prime Minister Peter Kažimír added, “It’s Tuesday evening and I’m pretty curious what the eurozone will look like when we finish.

Ireland’s finance minister Michael Noonan said agreement might be reached before the country has to repay the IMF on 30 June. But even if that happened, he added, the financial crisis in Greece would not be over and creditors’ trust would have to be rebuilt.

Belgian finance minister Johan Van Overtveldt blamed Greece for the failure of its second bailout programme. He criticised Tsipras and previous governments for only partially carrying out the reforms of its current bailout regime.

Background

The anti-austerity party Syriza won an overwhelming victory in the Greek elections on January 25, but failed to obtain an absolute parliamentary majority.

The party leader Alexis Tsipras provoked mixed reactions among his EU counterparts, announcing that the "vicious cycle of austerity is over".

Reforms offered by Athens have failed to convince the Eurogroup and the country's creditors, and Greece now finds itself unable to pay its debts and in a more precarious situation than ever.

The proposals were a bid to unlock the final €7.2 billion tranche of its international bailout, which creditors have refused to release unless Greece agrees to more austerity measures. Greek Prime Minister Tsipras was elected promising to end five years of austerity.

Without the bailout cash Greece will be unable to meet a €1.5 billion International Monetary Fund (IMF) payment on Wednesday (30 June), and a default could send Athens crashing out of the single currency and possibly the EU.

>>Read: LIVE: Greece edging towards default?

Timeline

  • 25 June: Eurogroup meeting.
  • 25-26 June: EU council summit.