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Eurozone calls on Athens to get serious over Greece debt crisis Eurozone tells Greece not to expect debt relief any time soon
(about 4 hours later)
Eurozone leaders have called on Greece to make “serious” proposals at an emergency summit if it wants to stay in the currency union. The Greek government has been told by its eurozone partners not to expect debt relief any time soon, amid fading hopes of decisive action to stop the country tumbling out of the currency union.
The summit was convened after Greeks issued a stunning rejection to a eurozone-drafted bailout plan on Sunday and is seen as one of the last real chances for a deal to stop Greece crashing out of the euro. Eurozone finance ministers arriving for emergency talks in Brussels made it clear they were waiting on Athens to sign up to further reforms and were in no hurry to discuss debt relief.
In a coordinated press statement, the leaders of France and Germany called on Greece to come up with “serious and credible proposals” at Tuesday’s summit consistent with its wish to stay in the eurozone. Finance ministers are preparing the way for a summit of eurozone leaders that gets underway on Tuesday evening. The summit, called after Greeks rejected the eurozone-drafted bailout plan in a referemdum on Sunday, is seen as one of the last real chances to secure a deal to stop Greece crashing out of the euro.
“We are now waiting for precise proposals from the Greek prime minister, for a programme that will allow Greece to return to prosperity. It is urgent to have these proposals so we can find a way out of this situation,” said the German chancellor, Angela Merkel, after talks with her counterpart, the French president, François Hollande. Greek banks are on the brink of running out of cash, but senior European figures are already dampening hopes of any breakthrough. “What we are going to do today is to talk to each other and restore order,” said the president of the European commission, Jean-Claude Juncker, adding that there would be no overnight solution.
Expectations of a breakthrough at the high-level talks on Tuesday night were dampened by the president of the European commission, Jean-Claude Juncker. Speaking at the European parliament on Tuesday morning, he said a solution would not appear overnight. “What we are going to do today is to talk to each other and restore order,” he said. In a coordinated press statement, the leaders of France and Germany called on Greece to come up with “serious and credible proposals” at Tuesday’s summit which are consistent with its wish to stay in the eurozone.
Juncker blamed the Greeks for walking out of negotiations and said it was up to the Greek government to come up with proposals that would allow Europe to get out of this situation. The demand was echoed by finance ministers, who stressed they wanted to see the Greek government sign up to reforms. Several made it clear they would not support any write-off of Greek debt.
Greek banks will stay shut on Tuesday and Wednesday, although it is far from clear they will be able to reopen on Thursday, as money drains out of the financial system. “We are not in the business of renegotiating debt,” said Finland’s finance minister, Alexander Stubb. “That was already done in 2011 and 2012,” referring to re-structuring of Greek debts that imposed heavy losses on private creditors.
The European Central Bank raised the pressure on Greek banks on Monday night by tightening access to emergency credit.The Frankfurt-based institution has pumped €89bn (£63bn) into the Greek financial system in recent months, but Greek banks can only tap this emergency aid by putting up collateral, such as Greek government bonds. Stubb said Finland’s commitments to Greece had proved to be more than anyone ever expected, totalling 10% of the Finnish government budget.
The European commission, the guardian of EU law, was openly split. Valdis Dombrovskis, the Latvian commissioner in charge of the euro, said a Greek exit from the eurozone could not be excluded. Pierre Moscovici, the French commissioner in charge of the economic policy, struck a different note, saying that Grexit would be a terrible collective failure.
Juncker blamed the Greeks for walking out of talks and said it was up to Athens to come up with proposals that would allow Europe to get out of this situation.
The depths of mistrust were highlighted by Latvia’s finance minister, Jãnis Reirs, who said his compatriots were surprised at the referendum result. “Latvian people do not understand Greek people,” he said.
As talks in Brussels grind on, Greek banks remain closed with it far from clear they will be able to reopen on Thursday, once the latest “bank holiday” comes to an end.
The European Central Bank raised the pressure on Greek banks on Monday night by tightening access to emergency credit. The Frankfurt-based institution has pumped €89bn (£63bn) into the Greek financial system in recent months, but Greek banks can only tap this emergency aid by putting up collateral, such as Greek government bonds.
The bank said on Monday it was “adjust[ing] the haircuts accepted on collateral”, meaning that Greek assets are now deemed more risky, to secure smaller amounts of emergency funds.The bank said on Monday it was “adjust[ing] the haircuts accepted on collateral”, meaning that Greek assets are now deemed more risky, to secure smaller amounts of emergency funds.
The level of emergency funding remains unchanged at €89bn, despite a plea from the central bank in Athens for an extra €3bn. The request was first reported by Bloomberg.The level of emergency funding remains unchanged at €89bn, despite a plea from the central bank in Athens for an extra €3bn. The request was first reported by Bloomberg.
The ECB said its governing council was “closely monitoring the situation in financial markets and the potential implications for the monetary policy stance and for the balance of risks to price stability in the euro area”.The ECB said its governing council was “closely monitoring the situation in financial markets and the potential implications for the monetary policy stance and for the balance of risks to price stability in the euro area”.
The Greek prime minister, Alexis Tsipras, pressed for capital controls to be lifted when he spoke to the head of the ECB, Mario Draghi, on Monday. After a hectic day of meetings with Greek party leaders, Tsipras also spoke to Christine Lagarde of the International Monetary Fund. She told him the IMF was no longer able to provide money to Greece until it clears its arrears, following last week’s default on a €1.6bn loan repayment.The Greek prime minister, Alexis Tsipras, pressed for capital controls to be lifted when he spoke to the head of the ECB, Mario Draghi, on Monday. After a hectic day of meetings with Greek party leaders, Tsipras also spoke to Christine Lagarde of the International Monetary Fund. She told him the IMF was no longer able to provide money to Greece until it clears its arrears, following last week’s default on a €1.6bn loan repayment.
Tsipras is expected to table fresh proposals to the eurozone summit to secure desperately needed financial aid. These “new” proposals are likely to be based on a plan Tsipras submitted last week, when he called for a €29bn two-year loan from the eurozone’s permanent bailout fund and promised to sign up to economic reforms that would bring further austerity to Greece. Tsipras is expected to table fresh proposals to the eurozone summit to secure desperately needed financial aid. These “new” proposals are likely to be based on a plan Tsipras submitted last week, when he called for a two-year loan of €29bn from the eurozone’s permanent bailout fund and promised to sign up to economic reforms, including further austerity.
Despite the departure of Greece’s finance minister, Yanis Varoufakis, reaching a deal will not be easy. Germany’s finance minister, Wolfgang Schäuble, who clashed often with Varoufakis, indicated the path ahead would be no easier for his successor.Despite the departure of Greece’s finance minister, Yanis Varoufakis, reaching a deal will not be easy. Germany’s finance minister, Wolfgang Schäuble, who clashed often with Varoufakis, indicated the path ahead would be no easier for his successor.
Euclid Tsakalotos, an Oxford-educated economics professor, was sworn in as Greek finance minister on Monday night, having already served as chief negotiator on the debt crisis for the Syriza-led government. Euclid Tsakalotos, an Oxford-educated economics professor, was sworn in as Greek finance minister on Monday night, having already served as chief negotiator on the debt crisis for the Syriza-led government. He arrived at Tuesday’s meeting without talking to reporters.
The 19 finance ministers of the eurozone were due to meet in Brussels at 1pm (noon BST) to prepare the way for the gathering of EU leaders scheduled for 6pm.
Hopes of a breakthrough are not high. Most bank analysts see a Greek exit from the eurozone as the most likely scenario. The Fitch rating agency is not even expecting a deal by 20 July when Greece must make a €3.5bn debt repayment to the ECB. If Greece misses this payment, the ECB would most likely declare its banks insolvent, cut off all emergency aid, triggering a swift euro exit.
Analysts at Standard and Poor’s believe the referendum result raised the chances Greece would leave the eurozone, although the rating agency thinks the negative impact on other vulnerable economies in southern Europe would be limited.
“We think it’s more likely than not now that ‘Grexit’ would happen because it’s just so difficult for Tsipras to row back after such a victory to what was on the table before,” S&P’s senior European sovereign analyst, Moritz Kraemer, told Reuters.
However, he did not expect to be downgrading the credit ratings of other high-debt eurozone countries.