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Sunday deadline for Greek debt plan

Published 07/07/2015

Greece's prime minister Alexis Tsipras leaves Maximos Mansion in Athens (AP)
Greece's prime minister Alexis Tsipras leaves Maximos Mansion in Athens (AP)

Frustrated eurozone leaders have given Greek prime minister Alexis Tsipras a last-minute chance to come up with a viable proposal on how to save his country from financial ruin.

Overcoming their surprise when Mr Tsipras failed to present them with a detailed plan, the leaders reluctantly agreed to a final summit on Sunday, saying that could give both sides an opportunity to stave off collapse of the struggling but defiant member nation.

Underscoring the gravity of the challenge, European Union president Donald Tusk decided to call all 28 EU leaders to Brussels instead of only the 19 eurozone members, because, for the bloc, it "is maybe the most critical moment in our history".

French president Francois Hollande agreed. "It's not just the problem of Greece - it's the future of the European Union" that's at stake, he said.

And highlighting the rising anger with Mr Tsipras over months of foot-dragging and surprising negotiating twists, European Commission president Jean-Claude Juncker had a stark warning for Greece.

"We have a Grexit scenario, prepared in detail," he said, referring to the situation in which Greece would have to exit the currency union.

With Greece's banks just days away from a potential collapse that could drag the country out of the euro, Mr Tsipras arrived today with only vague proposals and a commitment to back it up with real figures and a more detailed plan by Thursday.

Speaking to reporters late yesterday, Mr Tsipras said he made proposals to the leaders during the evening summit but it was unclear whether it meant anything more than the general direction of staving off too tough austerity and insisting on debt restructuring.

Yet he made clear he had gotten the message that there was not a moment to waste as deadlines for debt payments that Greece cannot afford draw near.

"The process will be swift, it will be speedy, it will begin in the next few hours with the aim of concluding until the end of the week at the latest," Mr Tsipras said.

According to a joint statement of the leaders, Mr Tsipras must set out Greece's proposals in detail for a reform agenda.

The country's international creditors will then assess the plan to prepare for another meeting of eurogroup finance ministers and ultimately Sunday's summit of the full EU.

Often such detailed plans have fallen by the wayside amid political bickering between Greece and its creditors.

Patience among Greece's allies was wearing very thin ahead of the meeting.

"You know, there was a promise for today. Then, they're promising for tomorrow," said Lithuanian president Dalia Grybauskaite. "For the Greek government it's every time 'manana'."

Mr Tsipras came buoyed by a triumph in last Sunday's referendum, where an overwhelming majority of Greeks backed his call to reject the belt-tightening reforms that creditors had last proposed.

But that domestic victory did not appear to give him much leverage in talks with foreign creditors, who know Mr Tsipras needs a deal soon to keep his country afloat.

Banks have been shut since last week and will not reopen before Thursday, cash withdrawals have been limited for just as long, and daily business throughout the country has come to a near standstill.

So it was with astonishment and dismay that European leaders learned Mr Tsipras did not yet have a written proposal for new rescue aid.

Dutch prime minister Mark Rutte said: "I'm extremely somber about this summit. I'm also somber about the question of whether Greece really wants to come up with proposals, with a solution."

Greece's eurozone partners have steadfastly said they want to help Greece stay in the currency club but have just as often complained about Greece dragging its feet during months of negotiations.

"At a certain point, you need to get to the truth," said Belgian prime minister Charles Michel, before asking: "Is there, yes or no, a political will of the Greek government?"

A Greek government official said Mr Tsipras was presenting a "common ground" to the 18 other leaders today, while a detailed proposal would come tomorrow.

He said the Greek government would submit a request for immediate financing in advance of five billion euro (£3.6 million) in loans due for repayment by the end of the month. He predicted a full political deal could be reached in two or three weeks.

German chancellor Angela Merkel warned Mr Tsipras he was dancing close to the financial abyss. "We are no longer talking about weeks but very few days," she said.

In his flurry of contacts, Mr Tsipras spoke by phone to US prresident Barack Obama, and the White House said it was in Europe's interest to reach a resolution that puts Greece on the path toward economic growth and stability.

An official from a eurozone nation said that Greece's failure to bring clear proposals to an earlier meeting of finance ministers caused widespread frustration. Greek finance minister Euclid Tsakalotos instead made only an oral presentation and discussed key issues.

"Everybody was angry," said the official.

Mr Tsakalotos left the leader's summit venue mid-evening, telling reporters: "My impression is that we are having a go to find an agreement soon."

The eurogroup's top official, Dutch finance minister Jeroen Dijsselbloem, said he hoped the Greek government would make a written request as soon as Tuesday night or Wednesday morning to tap Europe's bailout fund. Once that is in, the eurozone finance ministers would hold a teleconference to discuss the proposals and decide whether they can give Greece more loans.

One big sticking point in the talks is Greece's demand that the terms of its bailout loans be made easier.

European officials are split on the issue, with lead eurozone lender Germany still reluctant. The International Monetary Fund (IMF) called last week for European states to accept longer repayment periods and lower interest rates on their loans to Greece. Many economists say that Greece's debt burden, at almost 180% of annual GDP, is unsustainable for a country its size.

Getting a new rescue deal for Greece is urgent and becoming more so by the day. Greek banks are running out of cash even after the government shut them last week and placed limits on how much depositors can withdraw or transfer.

Normal commerce is now impossible in Greece. Small businesses, lacking use of credit cards or money from bank accounts, were left to rely on cash from diminishing purchases from customers, as Greeks hold on tight to what they have. And suppliers are demanding that businesses pay cash up front.

Mr Tsipras's appointment of Mr Tsakalotos as the new finance minister to lead talks with creditors was interpreted as a sign he may be willing to compromise. Mr Tsakalotos, a 55-year-old economist, replaced Yanis Varoufakis, who constantly clashed with his peers.

The lack of progress on Greece worried stock markets in Europe, where the Stoxx 50 index of top companies was down 2.1%. The euro also fell, while Greece's stock market remained shut since last week amid the bank closures.

Greece has been granted two bailout programs worth a total of 240 billion euro (£177 billion) in loans from other eurozone countries and the IMF.

But the spending cuts and tax increases demanded as a condition for the loans have hit growth, sending the country into a six-year recession and pushing unemployment to 25%.

The government, meanwhile, has been slower than hoped in making the economy more competitive and selling state assets to raise money.

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