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Greece Offers New Debt Plan, but Creditors Want Time to Study It Greece and Its Creditors Show Signs of Headway in Debt Talks
(about 3 hours later)
BRUSSELS — Eurozone finance ministers on Monday discussed the latest Greek debt proposal but ended their meeting without reaching an agreement, saying they would need to reconvene this week. BRUSSELS — Greece and its international creditors seemed on Monday to be edging nearer an agreement in their debt negotiations, after Athens submitted new proposals that would raise money through new taxes and cut costs by fine-tuning the nation’s pension system.
That outcome made it unlikely that European heads of state would be able to reach any resolution on Greece’s long-running debt crisis when the leaders gather here in Brussels for an emergency meeting Monday evening. European Union officials said that meeting would still be held as scheduled. Although eurozone finance ministers said after a short meeting here Monday that they would need to reconvene this week to fully assess the proposals, the head of the group sounded more positive than he had after previous meetings.
The Greek government had submitted new proposals to its creditors early Monday morning, for the latest round of meetings meant to break the deadlock over a debt crisis that has imperiled Athens’s continuing membership in the euro currency zone. Jeroen Dijsselbloem, head of the Eurogroup of eurozone finance ministers, said at a news conference that the Greek proposal was “welcome” and a “positive step in the process.” The proposal appeared to be “broad and comprehensive” and a “basis to really restart the talks,” he said.
Jeroen Dijsselbloem, the head of the Eurogroup of eurozone finance ministers, told a news conference after the Monday afternoon session that the Greek proposal was “welcome” and a “positive step in the process.” The proposal appeared to be “broad and comprehensive” and a “basis to really restart the talks.” Another important player in the debt negotiations, the European Commission president, Jean-Claude Juncker, said after the meeting that he was aiming for a deal with Greece by the end of the week.
In the latest proposal, the Greek government offered a concession around pensions, a major sticking point in negotiations. Athens is aiming to find pension savings of around 1.4 percent of gross domestic product by the end of 2016, exceeding creditors’ demands. To do so, the government is aiming to increase employer and worker contributions as opposed to cutting pensions outright, according to a person with knowledge of the Greek proposal. For Greece, time and money is fast running out in a debt crisis that has imperiled its continuing membership in the euro currency zone. Without economic overhauls that its creditors will accept, Greece will not receive a payment of 7.2 billion euros, or about $8.2 billion, from a bailout program that is due to expire June 30.
Mr. Dijsselbloem said there needed to be a concrete and precise list, agreed to by the Greek government, “of all the measures that they have to implement” and “take through Parliament.” He said the aim was to get a “final agreement later this week.” Without that money, Greece could default on its loans before the end of the summer. That danger holds incalculable risks to the integrity of the eurozone and the political stability of the broader European Union.
The meeting of Eurogroup finance ministers was brief. After about two hours, Alexander Stubb, the Finnish finance minister, indicated that the session had broken up but that efforts to get a deal would go on. But beyond that next loan payout, Greece’s larger goal is to win some measure of relief on its overall foreign debt, which totals more than €300 billion. It is too soon to know whether its creditors — the other eurozone countries, the European Central Bank and the International Monetary Fund — are prepared to grant Greece that relief.
“Work continues,” Mr. Stubb wrote on Twitter. On Monday, to buy time for Greece, the European Central Bank — for the third time in less than a week — increased its emergency funding to struggling Greek banks in an effort to compensate for the billions of euros that have been withdrawn in recent days by anxious depositors.
For now, though, an agreement continues to elude Greece’s creditors — the other eurozone countries, the European Central Bank and the International Monetary Fund — despite months of talks. And now, critical deadlines for extending the bailout are approaching as June ends. On hopes that a debt deal might finally be near, investors sent European stocks up more than 3 percent Monday. In Greece, stocks ended the day up more than 9 percent, and banking shares rose 20 percent. Interest rates on Greek government bonds fell sharply.
To buy time for Greece, the European Central Bank, for the third time in less than a week, on Monday increased its emergency funding to strained Greek lenders in an effort to replace heavy withdrawals from anxious depositors, according to a Greek banking official with knowledge of the decision who spoke on the condition of anonymity. The leaders of the 19-country eurozone were meeting Monday evening in Brussels for their own emergency session on the Greek crisis, although no final decision was expected.
Throughout the day, investors seemed confident that a deal was in the making. European stocks were up more than 3 percent and shares in Greece rose nearly 8 percent in afternoon trading. The interest rates on Greek government bonds fell sharply. But entering that meeting, Donald Tusk, the president of the European Council, the body that organizes such summit meetings, also signaled cautious optimism. “The latest Greek proposals are the first real proposals in many weeks, although they still need — it’s obvious for me — the assessment of the institutions and further work of course,” Mr. Tusk told reporters.
On Monday morning, Greece’s prime minister, Alexis Tsipras, had held an impromptu joint news conference here with Jean-Claude Juncker, the president of the European Commission. “I think this is time for a substantial and viable solution that would allow Greece to come back to growth within the eurozone,” Mr. Tsipras said. “The most important thing is that the leaders take full political responsibility for the political process to avoid the worst-case scenario, which means uncontrollable, chaotic Grexident,” said Mr. Tusk, using a term for a series of unplanned events forcing Greece out of the eurozone.
Mr. Juncker said, “We have made progress over the last few days, but we are not yet there.” Mr. Juncker displayed his trademark jocularity by giving Mr. Tsipras a friendly slap to the face before heading off for a series of private talks. Looking ahead to that meeting, the German chancellor, Angela Merkel, told reporters earlier in the day in Magdeburg, Germany, that “the time to approve the proposals is indeed short.” She cautioned, though, that the meeting would be a discussion, with no decisions made.
There had been “such confusion during the night with alternative versions of the Greek proposal coming in that there hasn’t been” adequate preparation for the Eurogroup meeting, Michael Noonan, the Irish finance minister, told reporters. The Greek government sent its new proposals early Monday morning — too late, apparently, for the finance ministers to give them full consideration at their afternoon meeting. The group “would have liked to have had them earlier so they could also have a personal understanding of what’s in them,” Mr. Dijsselbloem said at his news conference.
“We understand the Greek authorities have made some movement, and that’s to be welcomed,” Mr. Noonan said. “But it’s not clear that the movement is sufficient.” In the latest proposal, the Greek government offered a concession around pensions, which have been a major sticking point in negotiations. Many economists consider the pension system unsustainably lavish for a country that has spent much of the past five years in recession and where a quarter of the working-age population is unemployed.
The crisis apparently came to a head after Athens resisted economic overhauls demanded by creditors. Those overhauls were required in exchange for a payment of 7.2 billion euros, or about $8.2 billion, from a bailout program that is due to expire on June 30. That same day, Greece faces a debt repayment to the International Monetary Fund of €1.6 billion, which most observers say the country cannot afford without new aid. Under the new proposal, Athens is aiming to find pension savings equal to about 1.4 percent of the country’s gross domestic product by the end of 2016 — exceeding creditors’ demands. To do so, the government is aiming to increase employer and worker contributions as opposed to cutting pensions outright, according to a person with knowledge of the Greek proposal who spoke only on the condition of anonymity.
Donald Tusk, the president of the European Council who organized the emergency meeting of the leaders of the 19 European Union countries that use the euro, warned Athens late last week that it faced a critical choice on terms that had already been clearly outlined. Any move to tighten pensions could pose a political test for Mr. Tspiras’s leftist party, Syriza, which came to power in January promising to relieve Greece of the austerity imposed by its creditors.
Greek government officials declined to make the new proposal public on Monday, but in an interview with the BBC, the economy minister, Giriorgios Stathakis, said the money-raising measures would include a new tax on businesses, a new tax on the wealthy and increases in certain parts of the value-added tax — or sales tax — system.
A European Union official familiar with the Greek proposals, who spoke only on the condition of anonymity while discussions were underway about the contents, said the creditors and their negotiators were relieved to see suggestions by Greece for adjustments to the pension system and value-added tax, or V.A.T.
But a lingering question is whether the proposals will pass muster in the turbulent atmosphere of Greek politics, said one analyst, Wolfango Piccoli, a managing director at Teneo Intelligence.
“Looking ahead, the real risks remain located in Greek domestic politics, where government’s movement on the issues of pension and V.A.T. reform could be a tough sell — and would be an impossible one without any concessions on debt relief,” Mr. Piccoli wrote in a client note on Monday.
Mr. Piccoli, in a telephone interview later Monday, said any offer by negotiators and creditors to offer Greece a way to ease its debt repayments was unlikely until the Greek proposal had been fully assessed.
Another question that could preoccupy policy makers in coming days is how to help Greece avoid imposing capital controls to curb the flight of deposits from its banking system in the event it misses a €1.6 billion repayment to the International Monetary Fund next Tuesday, the same day the current bailout program is set to expire.
But on Monday, at least, the mood over the Greek debt negotiations was brighter than it had been in months. The tone was set in the morning here, when Mr. Tsipras and Mr. Juncker held an impromptu joint news conference. “I think this is time for a substantial and viable solution that would allow Greece to come back to growth within the eurozone,” Mr. Tsipras said.
Mr. Juncker said, “We have made progress over the last few days, but we are not yet there.” Mr. Juncker displayed his jocularity, giving Mr. Tsipras a friendly slap to the face before heading off for a series of private talks.