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Greece submits bailout fund request

Published 08/07/2015

Greek prime minister Alexis Tsipras leaves after an emergency summit of eurozone heads of state and government in Brussels (AP)
Greek prime minister Alexis Tsipras leaves after an emergency summit of eurozone heads of state and government in Brussels (AP)

Greece has made a request for aid from Europe's bailout fund as it rushed to deliver details of its proposed economic reforms in time to secure the country's future in the euro and avoid a descent into financial chaos.

The government has asked for a three-year loan programme and insisted the rescue will be accompanied by major economic reforms. No amount was mentioned.

According to the letter sent to the European Stability Mechanism, Athens said it would "immediately implement a set of measures as early as the beginning of next week".

Those include tax and pension reforms, details of which will be presented tomorrow at the latest. Those are two of the issues that divided the Greek government and creditors over the past few months of protracted discussions.

In the letter, the Greek government said it was asking for the loans "given the risk to the financial stability of Greece as a member state and of the euro area as a whole".

Its aim, it went on, was to regain "full and affordable market financing to meet its future funding requirements as well as sustainable economic and financial situation" by the time the loan ends at the latest.

Greece has been told it has to deliver details of the reforms by tomorrow night so a deal can be agreed at a summit of the European Union's 28 leaders on Sunday.

Without a deal, the country faces an almost inevitable collapse of the banking system, and European leaders have warned Greece this is its last chance to remain in the euro.

Prime minister Alexis Tsipras, addressing politicians at the European Parliament, said his country is seeking a deal that would bring a definitive end to his country's financial crisis. Greece has had two bailouts from its European partners and the International Monetary Fund since May 2010, totalling 240 billion euros (£172 billion).

"We need to ensure the medium-term funding of our country with a development and growth programme," Mr Tsipras told politicians in Strasbourg, France.

The head of France's central bank said he feared the "collapse" of the Greek economy and "chaos" if Greece does not strike a deal by Sunday.

And in unusually strong language, Christian Noyer told Europe-1 radio he predicted "riots" in Greece if no deal is reached. He also indicated the European Central Bank would effectively pull the plug on its emergency liquidity measures for Greek banks if no deal is struck.

Mr Tsipras insisted he has "no hidden agenda" to drive Greece out of the euro and that last Sunday's referendum result, in which voters soundly rejected a previous creditors' reform proposal, does not mean a break with Europe.

Applause rose from left-wing quarters in the EU Parliament when Mr Tsipras said aid to Greece only helped out banks, not ordinary Greeks. A few called for compromise.

The head of a conservative group in the Parliament, Belgium's Guy Verhofstadt, said he was "furious" at Mr Tsipras's failure to spell out specifics of his reform plans.

In Greece, meanwhile, people were struggling with an eighth day of limits on money withdrawals and shuttered banks. They cannot take out more than 60 euros (£43) a day from ATMs and are unable to send money abroad, including to pay supplies or bills, without special permission.

Mr Tsipras said Greece's troubles pre-dated his arrival in office in January and condemned the "austerity experiment" his country has endured over the past five years that he blames for spiralling unemployment and poverty.

"We demand an agreement with our neighbours, but one that gives us a sign that we are on a long-lasting basis exiting from the crisis - which will demonstrate to us that there is light at the end of the tunnel. An agreement which will bring about the credible and necessary reforms," he said.

Mr Tsipras vowed to continue reforms but warned about the austerity-weariness of the public.

"This has exhausted the patience and resilience of the Greek people," he said.

The Greek crisis has frayed the nerves of other European leaders, who have accused the Greek government, elected in January on promises to repeal austerity, of foot-dragging and exacerbating the situation.

Highlighting the rising anger with Mr Tsipras, European Commission president Jean-Claude Juncker had a stark warning for Greece after Tuesday's eurozone summit.

"We have a Grexit scenario, prepared in detail," he said, apparently referring to the situation in which Greece would be forced out of the currency union.

Greece's eurozone partners have said they want to help the country stay in the currency club while complaining about foot-dragging by the Greek government.

One big sticking point has been Greece's demand for some relief on its debt burden, which stands at around 320 billion euros (£230 billion), or around 180% of the country's annual GDP.

Germany appears to be particularly reluctant to help Greece deal with its debts if reforms are not forthcoming.

Germany's stance is at odds with the IMF - another major creditor. In a report last week, it said European states should accept longer repayment periods and lower interest rates on their loans to Greece.

The European Central Bank has decided not to increase the amount of emergency credit that Greek banks can draw on, according to sources.

A banking official, who spoke on condition of anonymity because the decision was not made public, said the ECB's emergency liquidity assistance was left unchanged.

The official said the bank is waiting to see how Greece's creditors respond to its financial aid request and its reform agenda, due to be published by tomorrow.

The Greek banks have needed increased credit to deal with the daily drain of deposits.

The ECB's failure to increase so-called ELA in line with Greek requests is one of the reasons why capital controls have been imposed in Greece, including the 60-euro a day withdrawal limit.

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