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| Greece given deadline to avoid banking collapse and euro exit | Greece given deadline to avoid banking collapse and euro exit |
| (35 minutes later) | |
| Greece has been given little more than 48 hours by European leaders to strike a longer-term bailout deal with its eurozone creditors this week or face a banking collapse, a humanitarian emergency and the start of exiting the single currency. | Greece has been given little more than 48 hours by European leaders to strike a longer-term bailout deal with its eurozone creditors this week or face a banking collapse, a humanitarian emergency and the start of exiting the single currency. |
| Unless Athens presents convincing details entailing more austerity as the basis for its third bailout in five years, all 28 national EU leaders, not just those of the eurozone, are to gather in Brussels on Sunday for an emergency session to decide how to contain the fallout from Greece’s financial collapse. | |
| The stark ultimatum emerged from a special eurozone summit in Brussels on Tuesday where the Greek prime minister, Alexis Tsipras, was pressed to explain to the other leaders how he wanted to proceed following his victory in the controversial referendum on Sunday when Greece voted no to eurozone austerity measures as the price of staying in the euro. | |
| Related: Greek debt crisis: Sunday summit called to discuss deal or Grexit - live updates | Related: Greek debt crisis: Sunday summit called to discuss deal or Grexit - live updates |
| The Greek leadership exasperated the EU leaders by failing to present new bailout proposals. It is to present a formal application on Wednesday for a new rescue package from the European Stability Mechanism (ESM), the eurozone’s permanent bailout fund. | |
| If Berlin, Paris, Brussels and other key creditor capitals can agree the terms and timings with Athens, Greece would be offered a stay of execution in the euro. If not, the summit of all 28 leaders including David Cameron and heads of government of other non-euro countries would convene on Sunday to deal with the consequences of a Greece cut loose from the eurozone financial system. | If Berlin, Paris, Brussels and other key creditor capitals can agree the terms and timings with Athens, Greece would be offered a stay of execution in the euro. If not, the summit of all 28 leaders including David Cameron and heads of government of other non-euro countries would convene on Sunday to deal with the consequences of a Greece cut loose from the eurozone financial system. |
| “That shows there’s only a few days to go to taking a decision,” said Germany’s chancellor, Angela Merkel. “That shows how serious it is.” | “That shows there’s only a few days to go to taking a decision,” said Germany’s chancellor, Angela Merkel. “That shows how serious it is.” |
| Related: The Guardian view on the Greek crisis: time for the French connection | Editorial | Related: The Guardian view on the Greek crisis: time for the French connection | Editorial |
| Government sources in Greece said Tsipras has proposed a two-pronged approach. The prime minister asked for three to four months of bridging finance that would keep the banks open and allow Athens to pay their pressing debts to the European Central Bank and the International Monetary Fund. That would be followed by a third bailout package lasting two years, which would include debt relief. | Government sources in Greece said Tsipras has proposed a two-pronged approach. The prime minister asked for three to four months of bridging finance that would keep the banks open and allow Athens to pay their pressing debts to the European Central Bank and the International Monetary Fund. That would be followed by a third bailout package lasting two years, which would include debt relief. |
| Despite his favoured no vote winning Sunday’s referendum by a large majority, Tsipras is aware that both emergency finance and a longer-term deal under the ESM would come with significant strings attached. | Despite his favoured no vote winning Sunday’s referendum by a large majority, Tsipras is aware that both emergency finance and a longer-term deal under the ESM would come with significant strings attached. |
| In the hope that Washington would lean on Brussels to agree a deal, Tsipras spoke to Barack Obama before the summit. The US president then spoke to Angela Merkel, putting pressure on the German chancellor to keep Greece in the eurozone. The White House is keen to avoid Greece leaving the euro, fearful that it could increase Russia’s influence in the eastern Mediterranean. | In the hope that Washington would lean on Brussels to agree a deal, Tsipras spoke to Barack Obama before the summit. The US president then spoke to Angela Merkel, putting pressure on the German chancellor to keep Greece in the eurozone. The White House is keen to avoid Greece leaving the euro, fearful that it could increase Russia’s influence in the eastern Mediterranean. |
| Related: Greek firms fear slow death as bank freeze cuts off imports | |
| Refusal by eurozone leaders – many of whom have lost patience with Tsipras – would lead to Greece’s departure from the single currency being confirmed at Sunday’s summit. | Refusal by eurozone leaders – many of whom have lost patience with Tsipras – would lead to Greece’s departure from the single currency being confirmed at Sunday’s summit. |
| Merkel warned before Tuesday night’s meeting that time was running out for Greece and leaders of the 19-strong eurozone made it clear that there was no immediate prospect of the debt relief Tsipras is seeking in exchange for tough new austerity measures. | Merkel warned before Tuesday night’s meeting that time was running out for Greece and leaders of the 19-strong eurozone made it clear that there was no immediate prospect of the debt relief Tsipras is seeking in exchange for tough new austerity measures. |
| Related: Greece is the latest battleground in the financial elite’s war on democracy | George Monbiot | |
| “It is not a matter of weeks any more, it is a matter of days,” Merkel said at the summit called to discuss the Greek crisis following the decisive rejection of its creditors’ terms demanded in last Sunday’s referendum. | “It is not a matter of weeks any more, it is a matter of days,” Merkel said at the summit called to discuss the Greek crisis following the decisive rejection of its creditors’ terms demanded in last Sunday’s referendum. |
| “[With] the Greek government it is every time mañana,” said Lithuania’s president, Dalia Grybauskaitė, one of the Greece’s harshest critics. “It can always be mañana every day.” | “[With] the Greek government it is every time mañana,” said Lithuania’s president, Dalia Grybauskaitė, one of the Greece’s harshest critics. “It can always be mañana every day.” |
| Financial markets reacted nervously to the lack of progress in resolving the crisis. Share prices fell around the world, and the euro slid against the US dollar. Oil prices dropped and investors sought out safe havens for their money, such as German bonds. | Financial markets reacted nervously to the lack of progress in resolving the crisis. Share prices fell around the world, and the euro slid against the US dollar. Oil prices dropped and investors sought out safe havens for their money, such as German bonds. |
| Even if Europe agrees to a new ESM bailout, the money would not be available to Greece until mid-August at the earliest – far too late to stop it from defaulting on a €3.5bn (£2.49bn) debt payment to the ECB due on 20 July. | Even if Europe agrees to a new ESM bailout, the money would not be available to Greece until mid-August at the earliest – far too late to stop it from defaulting on a €3.5bn (£2.49bn) debt payment to the ECB due on 20 July. |
| But sources in Brussels said that there was a fix available, provided leaders believed the departure of the former Greek finance minister Yanis Varoufakis had created some goodwill. | But sources in Brussels said that there was a fix available, provided leaders believed the departure of the former Greek finance minister Yanis Varoufakis had created some goodwill. |
| They said that when Greece’s second bailout expired last Tuesday, €3.3bn in ECB profits from its securities markets programme due to Greece also vanished. | They said that when Greece’s second bailout expired last Tuesday, €3.3bn in ECB profits from its securities markets programme due to Greece also vanished. |
| Related: What was good for Germany in 1953 is good for Greece in 2015 | Related: What was good for Germany in 1953 is good for Greece in 2015 |
| Ministers from the Eurogroup could decide to release the profits from 2014, which amount to €1.85bn, and top them up with an additional €1.5bn currently held by eurozone governments in order to solve the ECB problem. | Ministers from the Eurogroup could decide to release the profits from 2014, which amount to €1.85bn, and top them up with an additional €1.5bn currently held by eurozone governments in order to solve the ECB problem. |
| A eurozone source said: “It’s not an easy solution, but probably the only solution.” | A eurozone source said: “It’s not an easy solution, but probably the only solution.” |
| The advantage for Greece would be that the money could be released without the delays caused by having to obtain agreement through the parliaments of eurozone members. The potential downside, though, is that the cash would need to be authorised by the Eurogroup unanimously, meaning any single country could veto the plan. | The advantage for Greece would be that the money could be released without the delays caused by having to obtain agreement through the parliaments of eurozone members. The potential downside, though, is that the cash would need to be authorised by the Eurogroup unanimously, meaning any single country could veto the plan. |
| The economist Thomas Piketty, author of the bestselling Capital, said it was up to Merkel to show leadership and remember the benefits Germany had received from debt relief. | The economist Thomas Piketty, author of the bestselling Capital, said it was up to Merkel to show leadership and remember the benefits Germany had received from debt relief. |
| Related: Angela Merkel must act now for Greece, Germany and the world | Letters from Thomas Piketty, Jeffrey Sachs and others | |
| In a letter to the Guardian, Piketty and other leading economists wrote: “We urge Chancellor Merkel and the troika to consider a course correction, to avoid further disaster and enable Greece to remain in the eurozone. Right now, the Greek government is being asked to put a gun to its head and pull the trigger. Sadly, the bullet will not only kill off Greece’s future in Europe. The collateral damage will kill the eurozone as a beacon of hope, democracy and prosperity, and could lead to far-reaching economic consequences across the world. | In a letter to the Guardian, Piketty and other leading economists wrote: “We urge Chancellor Merkel and the troika to consider a course correction, to avoid further disaster and enable Greece to remain in the eurozone. Right now, the Greek government is being asked to put a gun to its head and pull the trigger. Sadly, the bullet will not only kill off Greece’s future in Europe. The collateral damage will kill the eurozone as a beacon of hope, democracy and prosperity, and could lead to far-reaching economic consequences across the world. |
| “In the 1950s Europe was founded on the forgiveness of past debts, notably Germany’s, which generated a massive contribution to postwar economic growth and peace. Today we need to restructure and reduce Greek debt, give the economy breathing room to recover, and allow Greece to pay off a reduced burden of debt over a long period of time. Now is the time for a humane rethink of the punitive and failed programme of austerity of recent years and to agree to a major reduction of Greece’s debts in conjunction with much needed reforms in Greece.” | “In the 1950s Europe was founded on the forgiveness of past debts, notably Germany’s, which generated a massive contribution to postwar economic growth and peace. Today we need to restructure and reduce Greek debt, give the economy breathing room to recover, and allow Greece to pay off a reduced burden of debt over a long period of time. Now is the time for a humane rethink of the punitive and failed programme of austerity of recent years and to agree to a major reduction of Greece’s debts in conjunction with much needed reforms in Greece.” |