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Greece 'ready to resume talks'

Published 15/06/2015

Greek finance minister Yanis Varoufakis
Greek finance minister Yanis Varoufakis

Greece has insisted it is ready to return to bailout talks "at any moment" after a breakdown in negotiations with creditors pushed the country closer to bankruptcy and jolted international markets.

As concern over Greece's financial future swelled across financial markets and the two sides quarrelled over who is to blame for the current stand-off, prime minister Alexis Tsipras called an emergency meeting with his team of bailout negotiators.

Without the release of the remaining money left in Greece's bailout fund, the country faces the prospect of a debt default on June 30, putting up limits on money transfers and eventually dropping out of the euro.

Those fears dominated trading in financial markets on Monday. The Stoxx 50 index of leading European shares closed down 1.6%, while the main index in Athens ended 4.7% lower.

Greek borrowing costs rose, in a clear sign that investors are more worried about default, with the yield on two-year bonds up 2.7 percentage points at 28.5%.

While remaining low, bond yields also rose in Italy, Spain and Portugal as investors worried those countries might be most affected by turmoil in Greece.

In recent days, hopes had emerged that the outlines of a deal could emerge at a meeting of the 19 eurozone finance ministers in Luxembourg on Thursday, but those expectations are fading after the weekend breakdown.

The meeting had been billed as a decisive moment in the protracted talks as the Greek bailout program runs out at the end of the month and Athens needs to pay some 1.6 billion euro £1.1 billion) to the IMF or risk a default.

The negotiations centre on freeing up 7.2 billion euro (£5.2 billion) to make sure Athens can keep paying off loans.

European officials urged Greece to swiftly resume negotiations with international creditors, which include its partners in the eurozone and the International Monetary Fund.

"Greece must not wait ... there's not a moment to lose," French president Francois Hollande said.

European Central Bank chief Mario Draghi told EU parliamentarians in Brussels that "the ball lies squarely in the camp" of the Greek government.

Mr Draghi underlined the ECB's role in supporting Greek banks, allowing up to 83 billion euros (£60 billion) in emergency credit, but cautioned that such lending could only continue so long as Greek banks remain solvent.

The lenders have been allowed to purchase short-term government bills within limits, helping the government with its day-to-day struggle to raise cash.

Mr Draghi said that limit could only be raised - a move that could help ease some of the government's financing concerns - if there was a clear prospect of an agreement that will lead to the release of more bailout money.

Asked under what circumstances the ECB would end emergency support, Mr Draghi said: "I don't want to speculate" on what would happen if Greece misses its upcoming payments to its creditors. The ECB will review its support for Greek banks on Wednesday.

Most observers think the ECB is very unwilling to pull the plug on Greek banks and would only take such a drastic step once political leaders have completely given up on a deal.

An official present at Monday's emergency meeting in Athens said a deal was not reached over the weekend because creditors' representatives were not authorised to decide on a renewed set of Greek proposals.

"We are awaiting an invitation from the (creditor) institutions and at any moment we will respond with the continuation of negotiations," the official said.

The two sides are at odds over who is responsible for the impasse.

European Commission spokeswoman Annika Breidthardt insisted Greece had been refusing to budge on key issues while the country's fellow euro countries, the ECB and IMF had made "quite substantial" concessions.

"It is not a one-way street," Ms Breidthardt told reporters.

Mr Tsipras sees it very differently. Greece's creditors, he argues, need to display "realism."

The Greek leader said the talks had stalled on demands by the creditors for a new round of pension cuts, which his government rejected.

"It is a gross misrepresentation of facts to say that the institutions have called for cuts in individual pensions," said Mr Breidthardt.

"Yes, the pension system is one of the most expensive parts of spending. It is also one of the most expensive pension systems in Europe. And therefore a reform of the pension system is part of the requirement."

Greek and EU officials also said that the two sides were still at odds over proposed sales tax hikes and how big a budget surplus the country should have when excluding debt interest payments.

"This is not an issue of ideological stubbornness. It's about democracy ... We will patiently wait for the institutions to display realism," Mr Tsipras wrote in the Efimerida ton Syntakton daily newspaper.

Greece has proposed a surprise increase in an emergency levy on incomes, agreed to demands for additional sales-tax revenue and higher corporate taxes for large profitable businesses.

Mr Hollande said he was likely to have the opportunity to speak soon with both Mr Tsipras and German chancellor Angela Merkel.

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