GREECE last night moved a step closer to a deal with its European creditors which would stave off an immediate financial collapse and prevent the debt-ravaged nation’s exit from the Euro currency zone.
The Eurozone’s top official, Jeroen Dijsselbloem, said the sides have “come a long way” after marathon talks in Brussels among finance ministers, but that the final effort on “some big issues” would be handled in a summit which was expected to go on into the night.
Italian prime minister Matteo Renzi said “we are very close” to agreeing a rescue package, thought to be made up of commitments from Greek PM Alexis Tsipras to push through a drastic austerity programme within days, while the 18 other Eurozone leaders would commit to start talks on a new bailout.
However, German chancellor Angela Merkel expressed doubts about the Greek government’s commitment to implementing tough measures as she ruled out “agreement at any price” on a debt rescue package.
The German leader set out a hardening of her county’s stance as the talks continued last night, with the Eurozone now giving the Greek government until Wednesday to put tough reforms into law.
Greece risks being ejected from the single currency zone if an agreement on economic reforms is not reached by the 18 other member nations.
Punishing tax rises and spending cuts are being offered in return for a financial lifeline of 53.5 billion euro (£38.5bn) to prop up the country’s failing banking system and avoid the possibility of crashing out of the single currency.
Greek premier Mr Tsipras yesterday stated he was confident of a deal, saying: “I’m here ready for an honest compromise. . . we can reach an agreement tonight if all parties want it.”
Mrs Merkel said that the Eurozone leaders would be considering whether “the conditions are met” to start negotiations on what would be Greece’s third bailout in five years, as she arrived for the talks.
“That’s what is at stake, nothing more and nothing less,” she said. But she warned that there would be “no agreement at any price”, adding: “We have to make sure the pros outweigh the cons – for Greece’s future, for the entire Eurozone and the principles of our collaboration.”
Greece desperately needs help to avoid a financial collapse. The economy is in freefall and the country faces big debt repayments in the coming weeks. Greek banks have been shut for almost two weeks and daily withdrawals from ATMs have been limited to a paltry 60 euros ($67). The banks, according to some reports, have barely enough cash to last the week.
Mrs Merkel, however, insisted that Germany would not be swayed from its stance that Greece needs to do much more to get any help just to save its position in the 19-nation Eurozone.
Arriving at yesterday’s summit meeting, she said: “Nerves are tense.”
German ministers were reported to be drawing up a plan that would allow Greece to exit the Eurozone temporarily if the talks fail – something the government in Athens said it is not aware of.
However, French president Francois Hollande, highlighting the differences within the creditors’ camp, insisted it was vital to keep Greece in the currency club and avoid a so-called Grexit.
If Greece had to leave the Euro currency, “it’s Europe that would go backward”, Mr Hollande said. “And that I do not want.”
France is considered Greece’s closest ally and even helped Mr Tsipras prepare the reform proposals that were a minimum requirement for getting fresh talks.
Mr Hollande added that France would “do everything to find a deal tonight, allowing Greece, if the conditions are met, to remain in the Eurozone and allowing Europe to progress”.
Jean-Claude Juncker, the European Commission president, said he will “fight until the very last millisecond” for a deal that keeps Greece in the Euro.
Finnish finance minister Alexander Stubb, one of Greece’s most outspoken critics, said a package of proposals sent to the leaders involved three key elements, including the Greek parliament’s passing of a series of unspecified laws by Wednesday.
If these conditions are met, then talks with Europe’s bailout fund can proceed, Mr Stubb said.
“We have surely taken a good leap forward,” he added.
Mr Tsipras has already cleared one hurdle, as MPs in the Greek parliament overwhelmingly backed a package of economic reforms and further austerity measures, in the hope that it would convince European creditors to back the third bailout.
The Eurozone ministers have to give their blessing to Greece’s bailout request to a European Stability Mechanism fund. Traditionally, Eurozone ministers agree by mutual consensus, though in exceptional circumstances a unanimous vote may not be needed. Greece has received two previous bailouts totalling 240bn euros ($268bn) in return for deep spending cuts, tax increases and reforms from successive governments. Although the country’s annual budget deficit has come down dramatically, Greece’s debt burden has increased as the economy has shrunk by a quarter.
The Greek government has made getting some form of debt relief a priority and hopes that a comprehensive solution will involve European creditors at least agreeing to delayed repayments or lower interest rates.
Greek debt stands at around 320bn euros ($357bn) – or 180 per cent of the country’s annual GDP. Few economists think the debt will ever be fully repaid.