Greece debt crisis: Athens blinks first
GREEK leaders appeared to blink first in the eurozone stand-off with Germany, promising to "immediately implement" tax and pension-related measures in return for a three-year loan from Europe's bailout fund.
In the letter sent to the European Stability Mechanism (ESM), the Athens government said it would "set out in detail its proposals for a comprehensive and specific reform agenda" that would avert national bankruptcy and an exit from the euro. These would include reforms to the tax and pension system, the letter promised.
However, the letter did not specify if Greece had agreed to the meet the full demands of its creditors and eurozone members which have called for a host of austerity measures including large cuts to pensions, VAT increases and a more robust tax-collection regime.
The letter was delivered to the ESM as Greece's Prime Minister, Alexis Tsipiras, pleaded in a speech at the European Parliament for a "sustainable" solution to the crisis, and a day after Greece's euro partners slapped a Sunday deadline on negotiations.
It appeared to show a new urgency by the Greek government, which had on Tuesday arrived in Brussels with no new proposals to end its crisis, despite the momentum of the referendum on Sunday that resoundingly rejected austerity measures demanded by Greece's creditors and partners - Germany principal among them.
Greece's aim, the letter went on, was to regain "full and affordable market financing to meet its future funding requirements as well as a sustainable economic and financial situation" by the time the loan period ends. It said the country was committed to honouring its financial obligations to its creditors, and on time. "We trust member states appreciate the urgency of our loan request," it said.The content of the letter was greeted with cautious optimism by some. The Spanish Prime Minister, Mariano Rajoy, said Greek's "tune" appeared to have changed for the better, but he was still waiting to see the "lyrics" of the proposal.
However, a spokesman for Germany's Finance Minister, Wolfgang Schäuble, said that Greece had to deliver "an exact account" of the reforms it would implement. "It must be complete. It won't be good enough to write a letter saying that Greece wants an aid programme."
Greece's apparent new urgency was signalled hours after the late-night warning from Donald Tusk, who chairs meetings of European leaders, that the EU had only five days left to find "the ultimate agreement". Declaring unambiguously "Tonight I have to say loud and clear that the final deadline ends this week," he made it plain that a Greek exit from the euro would follow if this deadline was not met.
On Wednesday, the governor of France's central bank, Christian Noyer, stepped up the rhetoric, declaring that Athens faced "riots and chaos" if a deal could not be agreed by the end of the week. "The Greek economy is on the verge of catastrophe," said Mr Noyer, who also sits on the board of the European Central Bank (ECB), one of Greece's creditors.
He said the ECB had maintained a "lifeline" for Greek banks but that "our rules oblige us to stop immediately at the point when there is no prospect of a political accord on a programme, or at the point when the Greek banking system crumbles".
That could come within days as banks remain closed, capital limits on withdrawals remain in place and liquidity dries up in a country which owes more than €300bn and whose GDP has fallen by 25 per cent in seven years.
Rigid capital controls introduced last week have already cost the country 40,000 jobs in its fragile construction industry, according to Zacharias Athoussakis, the chairman of Sate, a group which represents Greece's medium and large engineering companies.
"We estimate that approximately 40,000 people have departed in the last days, as many construction sites have closed down, leading to lay-offs and suspensions," he said,
Greece's letter, and the full plan if it is tabled, will be discussed on Thursday by officials from the eurogroup - the technical advisers working on a deal - rather than by finance ministers. The proposals can only be accepted if they show a timetable for structural reforms and an ability to service any further loans. From there, short-term measures must be agreed as a basis for negotiations, with a view to a deal being agreed by the end of the week.
However, any agreement must then be accepted by individual state parliaments - meaning that the German Bundestag, which has become hostile to any revised deal with Greece, has an effective veto. Germany's Finance Ministry said it did not see any reason to grant Greece a debt "haircut" or any other measures that would slash the value of money on loan to the crisis-ridden country.
"At the moment and in principle we see, as the Chancellor [Angela Merkel] said expressly... no occasion at all to discuss this issue," said a spokesman. "I explicitly add, we also take that to mean measures that aim to bring about a reduction in the cash value of debt." The tough messages appeared to be having an effect on Mr Tsipiras, whose struck a somewhat conciliatory tone when he told the European parliament in Strasbourg that Greeks had no choice but to find a way out of "this impasse".
"We are determined not to have a clash with Europe but to tackle head on the establishment in our own country and to change the mindset which will take us and the eurozone down," he said to applause from the left.
He admitted that after winning power on a promise to end austerity, he had "spent more time negotiating than governing" and was critical of Greece's failings as a society, citing a history of clientelism, corruption and chronic tax evasion that had "run riot".
Some MEPs, however, were not convinced. Guy Verhofstadt, the leader of the parliament's Liberal bloc, said: "I am angry because you are talking about reforms but we never see concrete proposals."
Plan of action: Debt proposals
What happened on Wednesday?
Greek Prime Minister Alexis Tsapiras said his country had a new plan to end the crisis. In a letter sent to the European Stability Mechanism, which deals with financial crisis in the eurozone, Greece said it was prepared to "immediately implement" tax and pension-related measures in return for three more years of loans.
What happens on Thursday?
Greece must submit its proposals by the end of tonight for them to be considered by the eurogroup, a group of experts trying to formulate a plan to resolve the crisis.
What must be in the proposals?
The plan must list the legislative measures Greece proposes and a timetable for the introduction of austerity measures and reforms. It must show it can service the €240billion bailout loans it has already and any new money it proposes to borrow.
The eurogroup must agree short-term measures to keep Greece afloat and use long-term proposals as a basis for negotiations. They need to strike a deal by the end of this week to meet the EU's "final" deadline to resolve the crisis.
Would there be any other hurdles?
Some national parliaments in the eurozone must debate anything put forward by Greece and accepted by the eurogroup. Germany's Bundestag requires a majority vote to reject or accept the deal.