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 In Athens, a government official denied that the possibility of
Greece failing to honour its debt commitments had been discussed by
the European Union, and said meetings with creditors would resume in
Brussels on Saturday.
No one knows, least of all in Athens or Brussels, whether the
anti-austerity government can reach a deal with its lenders before
an end-June deadline and thereby avoid putting the country in grave
danger of crashing out of the euro zone.
But senior euro zone officials are taking no chances, and discussed
a series of scenarios in Bratislava late on Thursday, several
officials told Reuters. These included a possible default on a 1.6
billion euro ($1.8 billion) payment that Greece must make to the
International Monetary Fund, the global lender of last resort, at
the end of this month, they said.
While Europe let loose a barrage of warnings, the leftist Greek
government exuded calm and optimism. A cheerful Tsipras was mobbed
by supporters late on Thursday at an open air concert to celebrate
the reopening of a TV station, still wearing the blue suit he had
worn at crisis talks that morning in Brussels.
His boisterous mood belied his tough talks with German Chancellor
Angela Merkel and French President Francois Hollande on Wednesday,
and European Commission President Jean-Claude Juncker on Thursday.
Juncker jokingly called the meeting room a "torture room".
The failure to break the stalemate prompted the IMF to send home its
team of negotiators on Thursday.
Nevertheless, the Greek government official said Athens was ready to
submit counter-proposals to bridge differences with its creditors at
the EU and IMF, and hoped for a deal when the Eurogroup of euro zone
finance ministers meets on June 18.
The Bratislava talks, called to prepare for the Eurogroup meeting,
concluded that there were three scenarios, and that the best of
them, reaching a deal next week, was the least likely.
The second scenario was a further extension of Greece's current
bailout programme, which expires this month at the same time as
Greece must repay the 1.6 billion euros to the IMF. The third -
discussed formally for the first time at such a senior level in the
EU - was to accept that Greece could default.
The meeting reached no decision or concrete conclusion, the
officials said.
EXTREME SCEPTICISM
Most officials argued it was unlikely that creditors, which include
the European Central Bank, would strike a cash-for-reforms deal with
Athens in time to disburse 7.2 billion euros still available under a
rescue programme extended in February for four months.
"It would require progress in a matter of days that has not been
possible in weeks. The reaction of the ECB, the IMF and several
member states was extremely sceptical," one official familiar with
the discussions said.
The Greek representative in Bratislava said Athens would do
everything to reach a deal in time, other officials said.
Merkel urged Athens and its creditors on Friday to keep pushing for
a deal. "Where there's a will there's a way, but the will has to
come from all sides so it's important that we keep speaking with
each other," she told a conference in Berlin.
Tsipras's government was elected in February promising to reject the
austerity policies it says have worsened one of the deepest economic
depressions in modern times. It says it wants a deal with creditors
that would keep Greece in the euro zone, but not at a cost of
violating "red lines", such as deeper cuts to pensions and workers'
rights.
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COMMON CAUSE
Thursday's departure of IMF experts gave Athens one area of common
cause with its European creditors.
"The non-participation of the IMF in the political negotiation
amounts to nothing more than putting pressure on everyone - the
Commission, the ECB, Greece," a Greek official said. "It is piling
pressure in all directions - especially Berlin - with the aim of
implementing tough policies in Greece in order to secure its money."
Tsipras has tried to create an impression of business as usual. His
first engagement after returning from Brussels on Thursday was a
concert celebrating the revival of the ERT state TV station, closed
exactly two years ago under cuts ordered by the EU and IMF lenders.
Tsipras cheered the event - and the reversal of austerity it
symbolised - as "a celebration of democracy".
"It is not the government that reopened ERT but the struggles of the
Greek people. Today we should all be happy and look to the future
with optimism," he said.
Tsipras met for about three hours with his negotiating team on
Friday. His deputy prime minister and chief negotiator will lead the
team in Brussels on Saturday.
Renewed uncertainty put European markets on the backfoot and sent
Greece's top share index <.ATG> down almost six percent on Friday.
The German Bild newspaper reported that the German government was
holding "concrete consultations", including about how Athens might
introduce capital controls restricting bank withdrawals in Greece
and transfers abroad should the country go bust.
Economists believe a solution remains possible but acknowledge that
the creditors may soon tell Athens to accept their demands or face
"Grexit" - market shorthand for Greece becoming the first country to
exit the euro zone.
"We are getting close to ... this take-it-or leave-it scenario,"
said Derek Halpenny from the Bank of Tokyo-Mitsubishi. "But nobody
in my view is ready to trade the 'Grexit' view yet. The expectation
is still that a deal will be reached."
Standard & Poor's credit ratings agency downgraded four Greek banks
on Friday. This followed its cut of Greece's sovereign rating on
Wednesday deeper into junk territory.
(Additional reporting by Lefteris Papadimas, Angeliki Koutantou,
George Georgiopoulos, Karolina Tagaris, Marine Pennetier, Caroline
Copley, Marc Jones and Andrew Callus; Writing by Matthias Williams
and David Stamp; Editing by Peter Graff and Crispian Balmer)
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