Creditors offered a five month extension to the current Greek bailout which expires on 30 June, after Athens brought its proposals closer to the demands of the “institutions”.
But Prime Minister Alexis Tsipras called the terms “political blackmail”, as they offer little money outside of what Athens needs to service its debts.
Lenders have expressed careful, but positive assessments after Greece tabled a new proposal during the EU summit which ended today (26 June). A representative of the ECB said they were quite close to the proposal of the IMF, the ECB and the Commission.
The Greek proposal offers a 0.93% of GDP annual revenue increase from a reform of the value added tax system, while creditors want the changes to deliver a 1.0% rise.
The Greek government must make a €1.6 billion payment to the IMF on 30 June, but doesn’t have the money. Athens is negotiating with other eurozone countries and the IMF to get €7.2 billion in loans, the last installment in the bailout package expiring at the end of this month. Without the funds, Greece will likely default on the IMF loan.
Even bigger payments come due later this summer. Creditors are demanding that Greece make reforms and cuts, including to public pensions, before releasing funds to cover them.
German Chancellor Angela Merkel and French President François Hollande held talks with Tsipras on the sidelines of the summit, and proposed that €15.3 billion be released until the end of November on the condition of Greece accepting the creditors’ plan.
The total is slightly more than Greece needs to service its debts over the next six months, but contains no new money.
Tsipras left the summit defiant, saying that he would fight for the European principles of democracy, solidarity, equality and mutual respect.
Speaking at the presser after the summit, Merkel said that she and Hollande strongly encouraged Tsipras to accept the “exceptionally generous offer from the three institutions now”.
She stressed that the meeting of the Eurogroup tomorrow was of the utmost importance.
Indeed, the Eurogroup will meet for a last attempt to find an agreement with Athens before time runs short for avoiding a default on 30 June, when the current bailout expires.
“We all think the offer is very generous and now we hope the internal process on Greece’s side will lead to a situation where everyone in the talks will be working towards a solution,” Merkel insisted.
At a separate press conference, Council President Donald Tusk commented on what Tsipras had said: “It is not political blackmail when we repeat day after day that we are very close to this day [30 June] when the game is over.”
“Leaders are not here to discuss details. I cannot imagine a realistic and substantive discussion about details of VAT in Greece, or pension reform,” he said.
But Commission President Jean-Claude Juncker said that what was true for Tusk was not true for him. Juncker stated that he had spent 15 hours holding discussions with the Greek Prime Minister overnight, between Tuesday and Wednesday.
Indeed, Tusk and Juncker have had different priorities and responsibilities. However, their different styles and approaches have become more and more obvious lately.
Tusk was blamed by Belgian Prime Minister Charles Michel for having made the summit spend five hours discussing two words in its conclusions on immigration.
Others have criticised Tusk’s bias towards the Eastern European member states, against the older members of the Union.
Juncker also indirectly commented on Tsipras’ blackmail accusation.
“This is not a take-or-leave situation,” he said, explaining that the Commission, the ECB and the IMF had agreed on a common position. The Greek side also had a new position, and that on this basis, negotiations were going to take place.
He said that tomorrow’s Eurogroup meeting was a real opportunity to reach an agreement, adding “I’m quite optimistic, but I’m not over-optimistic.”
In the event of failure, Eurogroup ministers are expected to discuss what is now called “Plan B”, that is, limiting the damage from the Greek default.
In the meantime, Tsipras would go back to Athens to confer with his cabinet and his party on the next steps.
Greek Finance Minister Yanis Varoufakis had another blast at the creditors’ approach in an interview with Irish radio today, saying their demands for tax increases and pension cuts as conditions for disbursing aid were putting Greece in an impossible position.
“I am against increasing the corporate tax, but then again I am against raising the tax on hotels and against cutting the pensions of people who live below the poverty line,” Varoufakis said on Irish national radio RTE.
“These issues are putting me and my government in an impossible position, having to make a bad choice among really hard, difficult, bad choices.”
But he did not rule out accepting the terms.