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 Euro zone finance ministers ended their third meeting in a week
without agreement after the three creditor institutions put a final
cash-for-reform proposal on the table in a showdown with Athens's
leftist government.
German Chancellor Angela Merkel, whose country is Greece's biggest
creditor, said the next meeting of Eurogroup ministers on Saturday
would be "of decisive importance" for a Greek solution since time
was running out.
She declined to speculate about what would happen if there was no
deal but said government leaders could not intervene in the complex
negotiations, and there was no new money beyond what was left in
Athens' frozen bailout program.
Without a deal at the weekend to unlock frozen aid, Greece, which
has received two bailouts worth 240 billion euros since 2010, is set
to default on a crucial repayment to the International Monetary Fund
next Tuesday.
That could trigger a bank run and capital controls, possibly setting
Athens on a path out of the euro zone and undermining the founding
principle that membership is irrevocable.
"The door is still open for the Greek side to come with new
proposals or accept what is on the table," Eurogroup chairman Jeroen
Dijsselbloem told reporters before briefing European Union leaders,
meeting at a summit next door, on the impasse.
Greece thrust its way onto the agenda of a 28-nation EU summit that
had been due to focus on migration, the long-term future of the euro
zone and launching a renegotiation of Britain's membership terms.
The leaders spent two hours on an unscheduled discussion of the
crisis, appealing to Prime Minister Alexis Tsipras to accept the
proposals on the table and spare the Greek people worse suffering,
EU officials said.
Tsipras urged fellow leaders to take responsibility and not leave
Greece's fate in the hands of the International Monetary Fund, but
they declined to step in, saying the talks must be run by finance
ministers, the officials said.
"The climate is that either by Saturday Greece accepts or on
Saturday there will be a discussion about Plan B," a euro zone
official at the summit said, referring to measures that would be
needed in the case of a default to prevent a Greek bank collapse and
limit any market contagion to other euro area countries.
Greek Finance Minister Yanis Varoufakis played down the latest
setback and said Athens stood by its own proposals, based largely on
raising taxes and social charges that the lenders say would not
raise enough revenue to plug a gaping budget hole.
"The institutions are going to look again at the two documents - our
documents and their own. There will be discussions with the Greek
government and we'll continue until we find a solution," Varoufakis
told reporters.
Merkel earlier told center-right party leaders there must be a deal
before markets open on Monday, two participants said.
Her comments behind closed doors echoed the height of euro zone debt
crisis talks in 2011-12, when EU leaders fearing a meltdown of the
single currency held repeated weekend summits.
Market jitters are on a much smaller scale now than in 2012, due
mostly to the European Central Bank's bond-buying program, and are
largely confined to Greek assets.
However, many EU officials and analysts say the longer-term damage
to the 19-nation single currency area from a possible Greek exit
could be more profound.
ULTIMATUM
After five months of acrimonious negotiations, the heads of the
European Commission, ECB and IMF gave Tsipras an ultimatum to offer
a credible reform plan by mid-morning on Thursday.
Instead, he arrived at a meeting with Jean-Claude Juncker, Mario
Draghi and Christine Lagarde with a paper demanding a commitment to
debt relief for Greece, officials said.
The creditors have refused to discuss easing Athens' debt burden
until Greece has adopted and implemented the economic reforms
promised under its existing bailout program.
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Diplomats said the lenders' tactics reflected exasperation at his
refusal to accept reforms of pensions, labor markets, wages and
taxation, which cross his Syriza party's self-declared "red lines".
The mood in Brussels has swung from hope to foreboding this week but
seasoned diplomats cautioned that in EU negotiations the situation
often looks bleakest before a last-gasp deal.
Italian Prime Minister Matteo Renzi said he was confident there
would be an agreement at the weekend.
Greek officials said they had modified their reform proposals,
notably to restore an exemption from value-added tax for Greek
islands, as demanded by Tsipras's coalition partners.
They said the government has already compromised by offering to
raise taxes and pension deductions, but the lenders kept revising
downwards estimates of how much each measure proposed by Greece
could raise, making it difficult to come up with an acceptable
offer.
Hardline Austrian Finance Minister Hans Joerg Schelling said the
final deadline for a deal was Sunday, a day before a German
parliament sitting that would have to approve the release of aid to
meet the IMF payment.
"ANNIHILATING MEASURES"
Greek politicians in Tsipras' party continued to be defiant.
"The lenders' demand to bring annihilating measures back to the
table shows that the blackmail against Greece is reaching a climax,"
Nikos Filis, Syriza's parliamentary spokesman, told Mega TV.
Frustration was palpable on both sides, with one euro zone official
describing the loss of trust in the Greeks as "extreme" and
questioning whether an agreement was realistic given the
intransigence from Athens.
In Frankfurt, powerful German Bundesbank chief Jens Weidmann voiced
concern in a speech about the continued provision of emergency
liquidity assistance to keep Greek banks afloat in the face of
massive deposit withdrawals.
ECB policy-setters held the limit on this emergency funding for
Greek banks steady for a second day running after weeks of
increases, raising pressure on Athens.
The more concessions Tsipras makes, the more resistance he will face
in parliament within his coalition and on the streets, where recent
protests, some organized with Syriza's support, have underlined
opposition to yet more belt-tightening.
"The lenders' hard core faction does not want a deal but a rift,
Greece's humiliation and the fall of the Tsipras government,"
Dimitris Papadimoulis, a Syriza member of the European parliament,
tweeted. "It won't get its way."
(Additional reporting by Yves Herman, Michele Kambas, Renee Maltezou,
James Mackenzie, Jan Strupczewski, Francesco Guarascio and Alexander
Saeedy; Writing by Paul Taylor; editing by Anna Willard, Sophie
Walker and Alastair Macdonald)
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