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 Time is fast running out for Greece to reach agreement with its EU
and IMF lenders and avert a default at the end of June that could
see it tumbling out of the euro zone. But talks ended without a
breakthrough on Thursday night and the International Monetary Fund
team abruptly left Brussels.
Both sides tried to keep hope alive on Friday and a Greek minister
said he hoped for an agreement on June 18. European Commission
President Jean-Claude Juncker said the ball was in the Greek
government's court, while the Eurogroup chief demanded "serious
proposals" for reforms.
Greece needs a deal to unlock aid or loosen curbs on how much it can
borrow in short term debt before a 1.6 billion euro ($1.8 billion)
IMF repayment due by the end of this month.
"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,"
Merkel told a conference in Berlin.
Despite the warnings of imminent default, Greek Prime Minister
Alexis Tsipras is showing no signs of alarm. His first engagement
after rushing home from Brussels on Thursday was an open air pop
concert celebrating the revival of the ERT state TV station, closed
exactly two years ago under cuts ordered by the country's European
Union and IMF lenders.
Renewed uncertainty put European markets on the backfoot and sent
Greece's top share index <.ATG> down on Friday morning. The German
tabloid Bild 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."
DEBT ISSUE
Tsipras faces major problems in meeting promises he made before his
election in January. He has vowed to end the waves of austerity
imposed by previous governments at the lenders' behest. He also
needs to keep the country in the euro zone: a poll this week showed
an overwhelming 77.4 percent of Greeks favored keeping the common
currency.
But the creditors are demanding yet more austerity and refusing to
release any aid until Athens backs down, raising the risk of default
and a euro zone exit.
Nevertheless, Tsipras put on a show of calm confidence at the
evening concert outside the ERT headquarters in an Athens suburb.
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Still in the blue suit he wore at the Brussels talks, he was mobbed
by supporters as he arrived at the party. "It's 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.
Major sticking points in the talks remain. Athens has balked at
measures such as curbing pension benefits and raising value-added
tax, and pressed lenders for more help to reduce the debt burden.
Its own delegation also flew home from Brussels on Thursday.
For a deal to work, EU officials said Tsipras's government needed to
come up with new savings and tax measures to replace those that
Athens finds unacceptable. People familiar with the talks said the
two sides have come closer to agreeing a primary surplus target but
cannot agree on how to achieve it.
Germany's finance ministry spokesman called the IMF's departure from
the talks a "warning" to Greece, although Juncker stressed that the
Fund's decision to withdraw its team did not mean the
Washington-based lender had given up on a deal.
Juncker also said he had given Tsipras a set of propositions in
discussions on Thursday evening, but it was not immediately clear
how Greece would respond, or whether it would send counter proposals
to take the talks forward.
"No matter what we do, if we don't start addressing the debt issue,
there is no chance that the Greek economy kickstarts," said Alekos
Flabouraris, a state minister. "And if the Greek economy doesn't
kickstart, we cannot deal with unemployment, shops will close down."
Anger against the grinding austerity measures imposed on Greece has
simmered in the capital Athens. A group of about 50 workers gathered
outside the deputy labor minister's office on Friday, demanding
jobs.
That followed a larger protest by the Communist-affiliated trade
union PAME on Thursday night, thousands of whom gathered to protest
in a central square.
Asked about the upcoming IMF payment, Deputy Finance Minister
Dimitris Mardas told SKAI radio: "It is our job to be paying our
obligations at the time when they are due."
(Additional reporting by George Georgiopoulos, Karolina Tagaris,
Marine Pennetier, Caroline Copley, Marc Jones and Andrew Callus;
Writing by Matthias Williams; editing by David Stamp)
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