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 Financial markets, long undisturbed by the wrangling over releasing
billions of euros of financing for Greece, reacted with mounting
alarm, with European stock markets hitting their lowest level since
February.
Yields on bonds issued by other vulnerable euro zone states leapt in
one of the most aggressive episodes of contagion since the height of
Europe's debt crisis in 2012.
Greece is set to default on a 1.6 billion euro ($1.80 billion) debt
repayment to the International Monetary Fund on June 30 unless it
receives fresh funds by then, possibly driving it towards the exit
of the euro zone.
Both Athens and international lenders from the European Union,
European Central Bank and IMF have dug into entrenched positions
with each side blaming the other for the collapse of talks at last
weekend.
Finnish Prime Minister Juha Sipila, whose country is among the most
hawkish creditors, said it would take "a miracle" to reach a
solution next week, but that was still everyone's aim.
Tsipras, who is due to address lawmakers from his own leftist Syriza
party at 2 p.m. (7 a.m EDT), said it was crucial that a viable deal
be struck. But he said resistance by European partners to accepting
a writedown of part of Greece's debt was standing in the way of
agreement, despite IMF pressure for restructuring.
"It is crucial to end this vicious cycle and not be forced into a
deal which, in six months' time, will bring us back to the same
point," he said.
Fears have grown that Greece is all but set to default by the end of
the month, which could open the way for a euro exit and usher the
single currency bloc into uncharted territory.
Officials denied a report in the Sueddeutsche Zeitung daily that
preparations were underway for capital controls to be introduced as
early as next weekend.
Talk of such drastic steps if no deal is reached was fuelled by a
call by German EU Commissioner Guenter Oettinger on Monday to
prepare for a "state of emergency".
Euro zone finance ministers will meet on Thursday to review the
stalled debt talks. EU officials denied reports that any emergency
summit of euro zone leaders was being planned for next Sunday. If
anything, Eurogroup finance ministers might meet again.
"There should be no illusions that an agreement will become easier,
or more advantageous over time or at the level of heads of state and
government," said one euro zone official.
CLOSE TO LIMITS
In Athens, there was little sign of public panic but increasingly
worried leaders of pro-euro opposition parties sought briefings from
Tsipras and implored him to strike a deal swiftly to prevent an
economic collapse.
"I called on the prime minister to consider that the Greek economy
is desperately close to its limits," Stavros Theodorakis, leader of
the centrist To Potami party, the fourth-biggest in parliament said
after meeting the prime minister.
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Tsipras had assured him there were still "two or three" steps Athens
could take to break an impasse in talks with its lenders, provided
the lenders also gave ground, Theodorakis said. The 17 lawmakers he
commands would vote for any deal in parliament that kept Greece in
the euro, he added.
Faced with a backlash from within his leftist Syriza party over
concessions to lenders, the support of parties like Potami and the
centre-left PASOK could prove crucial for Tsipras in voting through
any deal struck with creditors.
Syriza, however, has ruled out such an option, saying an agreement
must pass with the support of its own lawmakers.
Tsipras also met the new leader of PASOK as well as Dora Bakoyianni,
a prominent figure of the conservative New Democracy party on
Tuesday.
The meetings came as the euro zone continued to pile pressure on
Greece to concede ground to avert default.
Michael Grosse-Broemer, a senior lawmaker in Chancellor Angela
Merkel's conservative Christian Democrats (CDU), said a Greek exit
from the euro zone would have to be accepted if Athens did not
present a convincing reform package.
"I'm not so sure anymore if the Greek government is really
interested in averting damage for the people of Greece," he said.
Austrian Chancellor Werner Faymann, due in Athens on Tuesday, said
he had coordinated with European Commission President Jean-Claude
Juncker before meeting with Tsipras on Wednesday and hoped to head
off a Greek exit from the euro.
Faymann, a Social Democrat who has taken a relatively sympathetic
line on Greece in its debt talks with creditors, reiterated that
Athens must fulfill its commitments under its current rescue
programme.
But he added: "We need a longer-term plan which is linked to
conditions but also means... that whoever wants to invest in Greece
knows he is investing in a country that will still have the euro a
year from now."
(Additional reporting by Michael Shields in Vienna, Writing by James
Mackenzie; Editing by Paul Taylor)
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