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 Prime Minister Alexis Tsipras ignored a litany of pleas from
European leaders to act fast and instead blamed creditors for the
collapse in aid-for-austerity talks, the biggest setback yet in
long-running talks to secure more aid for Greece.
Athens now has just two weeks to find a way out of the impasse
before it faces a 1.6 billion euro bill due to the International
Monetary Fund, potentially leaving it out of cash, unable to borrow
and cast out of the single currency.
While there was little sign of open panic in Athens as Greeks held
out hope for a last-minute solution - a familiar theme over the past
six years as Athens lurched from one crisis to the next - the latest
impasse triggered a selloff in European and Asian shares and weighed
on the euro.
Greek stocks fell 6 percent, while banking stocks tumbled as much as
12 percent. Greek two-year government bond yields surged more than 3
percentage points to 29.02 percent.
"We should work out an emergency plan because Greece would fall into
a state of emergency," Germany's EU commissioner Guenther Oettinger
said. "Energy supplies, pay for police officials, medical supplies,
and pharmaceutical products and much more" needed to be ensured.
But in Athens, Tsipras - the 40-year-old novice radical leftist
leader elected on a pledge to end austerity - betrayed few signs of
alarm.
Ignoring warnings from European policymakers that it was up to
Athens to act now, Tsipras coolly said he was happy to wait it out
till the lenders changed their minds.
"We will await patiently until the institutions accede to realism,"
Tsipras said in a statement to Greek newspaper Efimerida ton
Syntakton. "We do not have the right to bury European democracy at
the place where it was born."
He blamed "political expediency" on the part of lenders and their
insistence on new cuts in pensions "after five years of looting
under the bailouts" for the latest impasse.
LIMITS FOR ALL SIDES
Tsipras will meet his negotiating team later on Monday as his
government plots its next move before a make-or-break meeting of
euro zone finance ministers on Thursday to discuss Greece's fate and
make a final attempt to bridge differences.
Athens has balked at demands to raise taxes and cut pensions to
narrow a projected budget gap and laid the blame squarely on
European and IMF creditors for insisting on politically unpalatable
pension cuts.
It says years of cuts have only made its situation worse by
shrinking the economy, making it harder to pay off debt.
Greece's creditors argue the country must reform its pensions system
if it is to put government finances on a sustainable footing. They
say many Greek workers retire younger than in other European
countries, collecting pensions that require unaffordable government
subsidies.
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"Why insist on pensions? Pensions and wages account for about 75
percent of primary spending; the other 25 percent have already been
cut to the bone," IMF chief economist Olivier Blanchard wrote in a
blog post.
"Just as there is a limit to what Greece can do, there is a limit to
how much financing and debt relief official creditors are willing
and realistically able to provide given that they have their own
taxpayers to consider."
The prospect of snap elections or a referendum to allow Tsipras a
face-saving way out of the crisis returned as an option in popular
debate in Greece, as the leftist leader faced calls from the
opposition to secure a deal to protect the country from an economic
collapse.
Although many economists predict that, as in past crises, a way will
be found to avert default, European politicians sound more
determined than ever to resist compromising with demands they
consider unreasonable.
Belgian Finance Minister Johan Van Overtveldt said in Berlin that
the euro zone's credibility would be damaged if agreements with
Greece were changed, and radical forces in other countries would be
emboldened.
Jens Weidmann, the head of Germany's central bank, said: "Time is
running out for Greece. The willingness to do a deal and act is
lacking."
Greece's Finance Minister Yanis Varoufakis retorted in an interview
with Germany's Bild newspaper that it was possible to reach a deal
quickly if Chancellor Angela Merkel took part in the talks.
"I rule out a 'Grexit' as a sensible solution," Varoufakis said,
referring to a possible Greek exit from the euro zone. "But no one
can rule out everything. I can't even rule out a comet hitting
Earth."
(Additional reporting by Angeliki Koutantou and Matthias Williams in
Athens; Writing by Deepa Babington)
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