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Eurozone Ministers Deny Greek Request to Extend Debt Talks
Greek Debt Crisis Intensifies as Extension Request Is Denied
(about 2 hours later)
BRUSSELS — Eurozone finance ministers on Saturday rejected Greece’s request to extend its debt negotiations beyond Tuesday’s deadline, seeming to bring a bitter end to months of discussions of how or whether to continue providing bailout loans to Athens.
BRUSSELS — Europe’s long standoff over Greece’s debt moved into an unpredictable stage on Saturday, with tensions reaching their highest levels yet and the risk growing rapidly that Greece could crash out of the European currency.
The rapid turn of events came only hours after the Greek prime minister, Alexis Tsipras, surprised Europe by calling for a national referendum on whether his country should accept bailout aid under terms he bitterly opposes.
On a hectic, fast-moving day, eurozone finance ministers meeting in Brussels rejected Greece’s request to extend its existing bailout program past a Tuesday deadline. Greece wanted the extension so it could hold a national referendum on July 5 to let voters decide whether the country should accept bailout aid under terms that the government of Prime Minister Alexis Tsipras bitterly opposes.
Mr. Tsipras’s announcement to resort to the ballot box, and his suggested date of July 5 for the vote, left the eurozone ministers with few options in their five-month effort to devise loan terms with Greece that all parties could accept. The ministers had been racing the clock — with five emergency meetings in the last 10 days — to reach a deal before Tuesday, when the current bailout program for Greece expires.
At the same time in Athens, Greek lawmakers held a long, impassioned debate in Parliament, many of them stunned by Mr. Tsipras’s decision to hold the high-stakes referendum. Lawmakers were expected to vote later Saturday evening on whether to go forward with the referendum, while across the city there were long lines at many cash machines as Greeks pulled money from banks out of concern that a fresh financial crisis could be at hand.
“The Greek government has broken off the process,” the leader of the Eurogroup of eurozone finance ministers, Jeroen Dijsselbloem, told a news conference. “However regrettable, the program will expire on Tuesday night,” he said, referring to the bailout package.
After five months of grinding negotiations, Mr. Tsipras’s surprise referendum gambit — announced early Saturday morning on national television while many ordinary citizens were asleep — left unclear whether he was seeking a final bit of leverage for a last-minute deal or was essentially calling an end to the negotiations.
When the Eurogroup reconvenes later Saturday, “it will be without the Greek colleague,” said Mr. Dijsselbloem, referring to Yanis Varoufakis, the Greek finance minister. The aim, he said, would be to take any measures necessary “to strengthen and to uphold the credibility of the Eurozone.” Later in the day, he seemed to suggest that Greece’s creditors were not interested in working with the current leftist Syriza-led government in Athens.
Negotiators in Brussels had been racing the clock — with five emergency meetings in the last 10 days — to reach a deal by the end of the day Tuesday, when the European part of the current bailout program for Greece expires.
Hanging in the balance has been an installment of 7.2 billion euros, or about $8 billion, from that bailout program that Athens desperately needs to avoid defaulting soon on its near-term debt obligations.
Greece is rapidly running out of money and has been negotiating over a remaining installment of 7.2 billion euros, or about $8 billion, so that Athens can avoid defaulting on some of its debt, including a payment also due Tuesday to the International Monetary Fund.
A Greek government official sent text messages to reporters on Saturday saying that Mr. Tsipras had spoken by phone with Chancellor Angela Merkel of Germany and the French president, Francois Hollande, and stressed that “whatever decision the Eurogroup takes, Greek people will have oxygen next week, they will survive!” He also said that “democracy is the paramount value in Greece” and that the referendum would be held no matter what the Eurogroup decided.
Greece’s creditors have been demanding cuts in pension payments and new taxes to give them assurance that Athens will be able to repay its debts in the long run. They have grown increasingly skeptical that Mr. Tsipras is willing to make the hard decisions they feel are necessary to put his government on more stable financial footing.
Talks seemed to collapse on Friday after Mr. Tsipras accused eurozone creditors like Germany, as well as the International Monetary Fund, of blackmailing his country. Ms. Merkel, though, insisted creditors had offered an “extremely generous” package to Greece.
Mr. Tsipras, who was elected this year on a platform of challenging the austerity policies that have defined the European response to seven years of economic trouble, has resisted some of the demands for additional cuts and accused the creditors — the eurozone countries, the European Central Bank and the International Monetary Fund — of humiliating the Greek people and imposing excessive hardship.
Mr. Tsipras then threw the matter into further confusion by announcing shortly after midnight in Athens that he would ask Parliament to authorize a referendum late the next week in which the Greek people could decide whether to accept the creditors’ latest offer. But he seemed to stack the deck, saying that the creditors were calling for “new, unbearable measures,” including tax increases and cuts to pensions and salaries that were a “humiliation” to Greece.
Uncertainties now abound in Brussels, Athens and the other European capitals, where leaders were weighing the costs of making last-minute concessions to Greece or possibly risk Greece becoming the first country to abandon the euro currency.
Mr. Varoufakis, the Greek finance minister, said in a news conference on Saturday that “fundamental issues” led his government to reject the creditors’ latest proposals. But he said the Athens government still was seeking some form of accommodation with creditors ahead of the referendum. That left room for additional negotiations and, depending on the outcome of those talks, the recommendation by the Athens government of how to vote in the planned referendum could “change to a ‘yes’ vote” in favor of accepting the bailout package, he said.
Among the most pressing issues is the health of the Greek banking system — and in particular whether the European Central Bank will continue to prop it up in the face of huge withdrawals.
The Greek Parliament was set to vote late Saturday on whether to hold a public vote.
The E.C.B. said in a statement that its governing council would meet to discuss Greece “in due course.” The central bank has tried to avoid taking any steps that would push Greece out of the eurozone. But the bank’s rules would make it more difficult for it to continue to support Greek banks without the prospect of an agreement with creditors.
Since the Greek economy imploded five years ago, the creditors — the I.M.F., the European Central Bank and the other eurozone nations — have committed loans to Greece worth more than €240 billion, or about $264 billion at today’s exchange rates.
Mario Draghi, head of the central bank, met to plot strategy on Saturday night with finance ministers and the head of the International Monetary Fund, Christine Lagarde. Some analysts predicted that Greek officials might be forced to introduce capital controls as soon as Monday.
An expiration of the current bailout program would leave Greece unable to tap the €7.2 billion remaining in the rescue package. And it would almost certainly guarantee that Greece would default on a payment of about 1.6 billion euros, or $1.8 billion, that is due to the I.M.F. on Tuesday.
“We are in a pretty big mess right now,” said Guntram Wolff, director of Bruegel, a research institute in Brussels.
The refusal by the Eurogroup to grant Mr. Tsipras the extension was the first clear sign that Mr. Tsipras and his government had overplayed their hand by failing to scare the country’s creditors — wearied by months of continuous wrangling and emergency meetings — into making last-minute concessions.
Mr. Tsipras spoke on Saturday afternoon with Chancellor Angela Merkel of Germany and President François Hollande of France. According to a text message sent a Greek government official sent to journalists, Mr. Tsipras told the other leaders that the “Greek people will have oxygen next week, they will survive!” He also said that “democracy is the paramount value in Greece.”
Arriving at the meeting on Saturday, the Dutch state secretary for finance, Eric Wiebes, also appeared to reject Mr. Tsipras’s suggestion for more time. “I see no reason for an extension,” Mr. Wiebes told reporters. “The deadline has been known for four months.”
For weeks, European finance ministers — the so-called Eurogroup — had been assembling to take stock of negotiations. But the dynamics shifted dramatically after Mr. Tsipras’s announced the referendum, with each side blaming the other for the risk of an irrevocable breakdown.
Asked what would happen if the Greek people voted in favor of accepting the bailout terms, Mr. Dijsselbloem told a news conference that still might not be enough to restart talks with the leftist Syriza-led government in Athens because its credibility had collapsed.
“The Greek government has broken off the process,” the leader of the Eurogroup of finance ministers, Jeroen Dijsselbloem, said at a news conference. “Let me just say that I am very negatively surprised by today’s decisions by the Greek government. That is a sad decision for Greece because it has closed the door on further talks, where the door was still open in my mind.”
“If it is a ‘yes,’ in the meantime there are major problems already for Greece,” Mr. Dijsselbloem said. “So this is a big problem of risk management I would say for the Greek government to think about,” he said.
Since the Greek economy imploded five years ago, the creditors have committed loans to Greece worth more than €240 billion, or about $264 billion at today’s exchange rates.
Another “question is who are we trusting, who are we working with, to implement that program,” said Mr. Dijsselbloem, who appeared to be suggesting that the country’s creditors were interested only in dealing with a new government in Athens.
An expiration of the European part of the current bailout program would leave Greece unable to tap the €7.2 billion remaining in the rescue package. And it would almost certainly guarantee that Greece would default on a payment to the I.M.F. of about 1.6 billion euros, or $1.8 billion, that is due Tuesday.
Eurozone ministers might instead discuss a so-called Plan B, which officials say is aimed at coordinating decisions by central banks in eurozone countries to limit any potential regional damage from a Greek default.
On the streets of Athens on Saturday, lines appeared at many cash machines, though there was no sign of any panic. Several people said they feared that the government might institute capital controls on Monday, restricting how much money they could withdraw from their bank accounts and leaving them unable to meet expenses.
Much of what happens next in the rapidly unfolding Greek crisis rests with the European Central Bank. The central bank’s president, Mario Draghi, was to meet in Brussels on Saturday with the Greek deputy prime minister, Yannis Dragasakis, and with Euclid Tsakalotos, the Greek official who has been coordinating negotiations with creditors.
Costas Mentis, a 52-year-old plumber, was among about 40 people lined up at a bank A.T.M. in the Athens neighborhood of Pangrati early on Saturday afternoon. He said he was “worried, not panicked,” and wanted to be certain he had enough cash to tide him over in case Greece imposed capital controls next week.
The European Central Bank has kept Greek banks afloat lately with daily doses of emergency liquidity to counter the outflow of money as anxious Greeks have withdrawn their savings. While there has been no sign of a full-scale bank run in Greece since Mr. Tsipras’s announcement, the lines at cash machines on Saturday in Athens were much longer than they had been in recent days.
“We don’t know what the next day will bring, so we’ve got to be prepared,” he said, adding that he had “filled the car up with gas too, just to be safe,” amid reports of lines forming at gas stations.
In an early morning television address, Mr. Tsipras appealed to the Eurogroup finance ministers to extend the bailout by “a few days” — presumably to allow the referendum to take place first.
“After five years of crisis, you don’t really panic anymore, but that doesn’t mean that things aren’t bad,” he said. “They’re really bad, and it looks like they’re going to get a whole lot worse, but we need to be calm and deal with it.”
But frustrations with the government in Athens have reached new highs. Giving Greece more time is likely to meet stiff opposition from finance ministers, including Wolfgang Schäuble of Germany — although some other voices in Germany appeared to call for a more supple approach.
In Parliament, lawmakers huddled with colleagues in hallways or sat in the main chamber as the afternoon was filled with speeches. Even government ministers were lined up at an A.T.M. near the chamber.
Speaking on Saturday morning, Sigmar Gabriel, Germany’s vice chancellor, urged his colleagues to consider the proposal by Mr. Tsipras.
The leader of Greece’s junior coalition partner Independent Greeks, Panos Kammenos, described the creditors’ behavior toward Greece as “absolute fascism,” saying their aim was to subjugate the Greek people.
Mr. Gabriel, who is the leader of Germany’s center-left Social Democrats, told Deutschlandfunk radio:
“They are asking us to annihilate Greece,” he said in a speech interrupted by sobs.
“We would be well advised not simply to push this proposal from Mr. Tsipras aside and say that it’s a trick. If the questions are clear — if it’s really clear that they are voting on a program that has been negotiated — it could make sense.”
Olga Kefalogianni, a lawmaker with the opposition New Democracy Party, said staging a referendum on such short notice made little sense, especially since many voters had not yet been able to examine the specifics of the creditors’ last proposal.
A Greek government spokesman, Gavriil Sakellaridis, said Mr. Tsipras spoke on Friday night by phone with Mr. Draghi, the central bank president, who “showed absolute understanding and sensitivity to the democratic decision of the Greek government.”
Now the question is whether Mr. Tsipras and other European leaders can still negotiate as the clocks tick despite the deep distrust that has developed during the negotiations.
But if the European Central Bank ends its emergency funding to Greece’s banks, the Greek government might need to impose capital controls, limiting how much money people and companies could withdraw from banks. That would further weaken an already ailing economy and could stir popular anger.
Yanis Varoufakis, the Greek finance minister, attended the initial Eurogroup meeting on Saturday, but the Eurogroup leader, Mr. Dijsselbloem, said a second session “will be without the Greek colleague,” declining to even use his name. Mr. Dijsselbloem said at a later news conference that Mr. Varoufakis left “on his own account” before the meeting had ended and before the remaining ministers decided on a follow-up meeting.
The bigger fear is that a Greek default could force the country eventually to be the first to leave the 19-nation euro currency union and threaten the regional integrity of the broader European Union.
In his own news conference, Mr. Varoufakis insisted that the Athens government was still seeking some form of accommodation with creditors.
Mr. Tsipras said early Saturday that the choice to be offered in a referendum would be whether to accept or reject the creditors’ proposals that many Greeks regard as toxic.
But Mr. Dijsselbloem suggested only minutes earlier that further talks would be fruitless because the credibility of the Greek government had collapsed.
Some Greeks said a better question would be to ask whether Greece should remain in the single currency, a scenario that most Greeks favor. But Mr. Varoufakis told a news conference that the referendum could not be about the euro because membership of the single currency was meant to be irrevocable.
“There are no provisions for exit from a monetary union,” said Mr. Varoufakis, who said the rules foresaw only departure from the European Union. “Anyone who wants us to pose that question must first change the treaties of the European Union,” he said, referring to exit from the Eurozone.
