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Eurozone tells Greece not to expect debt relief any time soon Eurozone tells Greece not to expect debt relief any time soon
(about 1 hour later)
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 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.
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.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.
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. But there was incredulity when it emerged Greece’s new finance minister Euclid Tsakalotos had not come armed with detailed proposals.
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. Finance ministers are preparing the way for a summit of eurozone leaders that gets underway at 5.30pm BST. The summit, called after Greeks rejected the eurozone-drafted bailout plan in a referendum on Sunday, is seen as one of the last real chances to secure a deal to stop Greece crashing out of the euro.
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. Greek banks are almost out of cash and some Eurozone figures are already saying that Grexit is the only option for the debt-ridden country.
The head of Latvia’s central bank told domestic radio that the “brave” Greek nation had “voted itself out of the eurozone”.
The president of the European commission, Jean-Claude Juncker, said he was not in favour of a Greek exit from the eurozone, but dampened hopes of a breakthrough. “What we are going to do today is to talk to each other and restore order,” said adding that there would be no overnight solution.
Tsakalotos, the Oxford-educated economics professor, who was sworn in as Greek finance minister on Monday night, arrived at Tuesday’s meeting without talking to reporters.
Neither did he bring any detailed proposals - an omission that took other eurozone governments by surprise. Malta’s prime minister Joseph Muscat said “the absence of a concrete proposal” wouldn’t help the eurozone leaders’ summit.
The absence of a concrete proposal by #Greece government doesn't help this evening's #Eurozone leaders' meeting -JM
The leaders of France and Germany had made it clear they expected Greece to come up with “serious and credible proposals” at today’s summit.
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.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.
“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.“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.
Stubb said Finland’s commitments to Greece had proved to be more than anyone ever expected, totalling 10% of the Finnish government budget.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.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.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.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. As talks in Brussels grind on, Greek banks remain closed and it is far from clear they will be able to reopen on Thursday, when an extended bank holiday is due to end.
Greece has to find €3.5bn to meet a debt repayment to the European Central Bank in two weeks’ time (20 July). Failure to make the payment would leave the ECB with little choice but to declare Greek banks insolvent and cut off all emergency aid, almost certainly triggering a eurozone exit.
But many analysts suspect Greek banks cannot last this long without financial help.
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 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. “Restoration of liquidity in the Greek banking system [is] an immediate priority,” Greek president Prokopis Pavlopoulos wrote in a letter to the European Council president Donald Tusk.
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 two-year loan of €29bn from the eurozone’s permanent bailout fund and promised to sign up to economic reforms, including further austerity. Analysts at Capital Economics said Greece’s creditors may soon have to “accept the inevitable” and cut Greece loose.
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. “Greece and its creditors may yet find a way to step back from the brink. But without major debt relief, any near-term deal looks likely just to put off the inevitable for a bit longer,” wrote chief European economist Jonathan Loynes. “Meantime, Greece’s economic and fiscal position will continue to worsen and the eurozone’s policymakers will devote yet more time and effort to what looks increasingly like a hopeless cause. We don’t say it at all lightly. But it might well be time to let Greece go.”
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.