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E.U. Official Urges Greece and Creditors to Make Concessions Greece Gets Last-Minute Help From France on Bailout Proposal
(about 3 hours later)
BRUSSELS — A European Union leader called on Greece and its creditors to make concessions before a deadline of midnight Thursday, as officials in Athens scrambled to draft an economic proposal that might lead to a bailout deal. ATHENS — As Greece engaged in a last-minute scramble on Thursday to formulate a bailout proposal that could determine whether it remains in the euro, France, its most sympathetic ally among Europe’s big powers, stepped in to give a helping hand.
Donald Tusk, the president of the European Council, which represents national leaders, said there was scope for an agreement if Greece made “concrete” proposals — and if the creditors, including eurozone members like Germany, were prepared to ease the burden of Greece’s enormous debt. While the assistance appears to be mostly technical, it highlighted the contrasting approaches being taken by the two leading powers in the European Union. Germany has stood firm against concessions to Greece, while France has thrown itself into the search for a deal.
In Athens, Prime Minister Alexis Tsipras met with government ministers to seek their approval for the broad strokes of the proposal. Euclid Tsakalotos, the finance minister, was drafting that document, advised by French technical experts, Paris officials said. The French assistance appeared to be an effort to make sure the Greek proposal, due by midnight, would be as thorough and salable as possible to Greece’s creditors and would smooth the way for a compromise on a new bailout package to keep Greece afloat financially and inside the euro.
The active role of France, whose officials have been publicly urging that Athens and its creditors find a solution that would keep Greece in the eurozone, is an intriguing development. It raises the question of whether Paris is working with the knowledge of Berlin, which has voiced skepticism about Greece’s ability to come up with a workable plan, or whether a rift is developing between France and Germany on the Greek issue. “There is a group of people who have been sent to help the Greeks, to try to transform words into action,” said a French government official with knowledge of the effort.
Either way, a draft plan from Greece is the crucial next step in a fast-track process leading toward Sunday night. That is when all 28 leaders of European Union member states are scheduled to meet in Brussels to decide — supposedly once and for all — whether Greece can receive bailout funds to rescue its nearly bankrupt economy. The representatives of Greece’s main creditors — the European Commission, the European Central Bank and the International Monetary Fund — are scheduled to review the new proposal in Brussels on Friday. Any sign at that meeting that Greece had assuaged its creditors by agreeing to pension cuts, tax increases and other steps could make it easier to reach a deal when all 28 leaders of European Union member states gather on Sunday to decide once and for all whether Greece should receive bailout funds or be pushed out of the eurozone.
The question is whether the plan expected from Greece by the end of Thursday would include enough specific commitments — to cut pensions, raise taxes and make other economic changes — to convince eurozone finance ministers that the negotiations are worth continuing. Reaching the decision will also require an assessment by the 19 finance ministers of eurozone countries. That meeting, of the so-called Eurogroup, has been scheduled for Saturday afternoon in Brussels.
Copies of the Greek proposals were expected to go to the European Central Bank and the International Monetary Fund as well as the leadership of the Eurogroup, the assembly of finance ministers whose countries use the euro. Along with the eurozone nations, the E.C.B. and the I.M.F. have already committed more than 240 billion euros to Greece since 2010. France has been the most steadfast major nation in Europe supporting Greece ever since Prime Minister Alexis Tsipras was ushered in to power in January on a mandate to repudiate austerity. Paris has been particularly outspoken in recent days about the need for a compromise that would help Greece and hold the eurozone together.
The most recent round of debt talks with Greece have already dragged on for five months without bearing fruit, and Mr. Tusk on Thursday urged eurozone leaders to accept more debt relief for Athens than has been on the table so far. France’s posture has been a sharp contrast to that of Germany, whose chancellor, Angela Merkel, has shown little inclination to compromise on demands that Greece take actions to show that it can be fiscally responsible before even considering new bailout aid.
Domestic pressure on Mr. Tsipras — who has promised to keep the country in the eurozone while also curtailing austerity — still could undermine an agreement. In particular, Mr. Tsipras must gain the backing of his cabinet, a tough task in view of the painful measures that are needed to win creditors’ approval and that are sure to alienate many of them. Mr. Tsipras’s coalition partner and defense minister, Panos Kammenos, told reporters on Thursday evening that the cabinet had approved the proposal and that it would be sent to creditors in the next few hours. There was no separate confirmation. Neither French nor German officials would discuss France’s involvement in the Greek proposal in any depth. But the development raised questions about whether France and Germany have split heading into the final negotiations or whether there is a back-room understanding between Paris and Berlin that Greece needed further encouragement to make substantive concessions if it was to retain the chance to stay in the euro.
Mr. Tsipras may then need the opposition’s support to push the measures through Parliament if the hard-left faction of his Syriza Party rebels. Mr. Tsipras and his team spent the day in meetings as they put together a proposal and sought to ensure domestic political support for it.
Mr. Tusk suggested that a more explicit promise from eurozone leaders to ease repayment terms would smooth the way for Mr. Tsipras to agree to the tough terms on spending and economic overhauls that the creditors are seeking. In one indication that European officials are trying to create a more positive atmosphere for the end game of the negotiations, Donald Tusk, the president of the European Council, the body that represents European Union leaders, said on Twitter that both the eurozone and Athens needed to make concessions.
Greece owes more than 300 billion euros, or $330 billion. Any “realistic proposal from Athens needs to be matched by realistic proposal from creditors on debt sustainability to create win-win situation,” Mr. Tusk wrote after speaking with Mr. Tsipras.
A more explicit promise from eurozone leaders to ease repayment terms, Mr. Tusk suggested, would also smooth the way for Mr. Tsipras to agree to the tough terms that the creditors are seeking. Ms. Merkel, speaking later in Sarajevo, reiterated her opposition to actually writing off some of Greece’s debt, though she was less definitive about steps like reducing interest rates or extending the payment period as ways of helping Greece manage its indebtedness.
“We expect Greece to put forward by the end of today proposals that are both comprehensive and specific,” Mr. Tusk said at a news conference on Thursday with Xavier Bettel, the prime minister of Luxembourg. “If this happens, we will also need a parallel proposal from the creditors,” Mr. Tusk added, noting that he had spoken earlier in the day with Mr. Tsipras. Germany has taken an increasingly hard line toward Greece since the nation voted no on Sunday to an earlier bailout program in a referendum that sent political shivers across Europe. In the wake of the chaos sparked by the vote, Ms. Merkel flew Monday to Paris to join President François Hollande of France to discuss what to do next with Greece.
“The realistic proposal from Greece will have to be matched by an equally realistic proposal on debt sustainability from the creditors — only then will we have a win-win situation,” Mr. Tusk said. The vote angered Mr. Hollande and another Greek ally, Finance Minister Michel Sapin of France, both of whom issued stern warnings that the ball was now in Mr. Tsipras’s court. On Thursday, Mr. Sapin took a harder tone than he has in recent months, saying that while Europe should show solidarity toward Greece, that would not be forthcoming if Greece did not show responsibility.
Mr. Tusk said he would not elaborate on his telephone call with Mr. Tsipras because of the need for discretion at “such a difficult moment” in the negotiations. The eurozone’s credibility might suffer if Greece leaves the common currency, Mr. Sapin added, but it might also suffer if Greece is allowed to stay despite flouting the rules of membership.
Big lenders like Germany have ruled out any reduction in Greece’s overall debt, and they have said that any easing of repayment terms could be offered only after the Athens government had committed to far-reaching economic changes. But unlike a number of German officials, no politician in France has agitated to get Greece thrown out from the eurozone.
In addition to Germany, the push by Mr. Tusk, a former prime minister of Poland, may have been aimed at former Soviet bloc countries that are now part of the European Union, such as Estonia and Slovakia. Like Poland, they are among the countries that endured decades of Communist rule before undergoing painful overhauls and belt-tightening required to join the European Union and, subsequently, the euro currency union. Their leaders are among those who have taken the toughest line with Athens. When Greece in 2012 was the epicenter of the last flare-up in Europe’s long-running debt crisis, many French officials steadfastly maintained that the euro currency union was fundamentally a historic project, and that it should not risk being broken up by the departure of Greece, nor of any other euro member country.
Greeks faced with the unwelcome trade-off of signing up to a deal promising more austerity or with losing their country’s membership of the euro were planning dueling rallies on Thursday and Friday. Similar demonstrations have been largely peaceful, but have underscored the deep divisions over how the crisis should be tackled. That sentiment was renewed by Prime Minister Manuel Valls of France on Wednesday. “France refuses that Greece leaves the eurozone in the name of our position and our commitments,” he told lawmakers in the National Assembly on Wednesday in a speech that was broadcast live on Greek television. To secure a deal, though, he said Greece needed to pledge to modernize its economy and overhaul pensions.
Under the slogan “We’re staying in Europe,” citizens who favor a deal with creditors were expected to converge outside the Greek Parliament at 7.30 p.m. on Thursday. A second rally, planned for Friday at 7.30 p.m., also outside the Parliament, was expected to be held under the banner, “Hands off democracy,” and to oppose any deal that involves painful measures. He also suggested that Mr. Tsipras’s most pivotal request — a program to make Greece’s mountainous debt more sustainable — be taken seriously by other European countries as part of any deal. Until recently, that has been nearly a taboo idea in Europe’s halls of power, since European taxpayers are currently on the hook if Greece defaults on its debts.
“There can be no taboos. It is essential to establish a sustainable trajectory for Greek debt in the coming years,” Mr. Valls said. “That is obligatory to advance towards a long-lasting solution.”
The United States has also urged a solution. In a flurry of recent phone calls with the French, German and Greek leaders, President Obama and Treasury Secretary Jack Lew have pressed all sides to come to a deal that would avoid a breakup of the eurozone.
A departure by Greece would hold not just financial and economic implications for Europe and global financial markets, but geopolitical significance at a time when the United States is grappling with conflicts between Russia and Ukraine and a widening problem in the Middle East.
The situation has put Mrs. Merkel into the toughest position of her career. She must balance between an angry German public, which sees no reason to give Greece billions of additional bailout money or write down its debt, when Athens for five years has made relatively scant progress in reforming its economy.
Although Greece has paid the price for austerity measures that have been pressed upon the country to make up for politicians’ failure to make structural changes that would get the economy growing again, Mrs. Merkel also does not want her legacy to include a decision that weakened Europe, rather than shoring it up as a great global power.
On Thursday, as Mr. Sapin appeared alongside his German counterpart, Wolfgang Schäuble, at a conference in Berlin, it was not clear that the two sides were any closer to an agreement about the Greece problem.
Mr. Schäuble said he would consider a proposal to restructure Greece’s debt, but he expressed doubt that such a proposal would solve the country’s underlying problems.
“In the days to come we will discuss whether there is an option, but I am skeptical,” he said.
He called on the Greek government to demonstrate its good will by taking concrete action in its Parliament to address calls by other eurozone countries to improve the shattered Greek economy’s ability to grow.
“If you really want to regain trust, why don’t you just do something,” Mr. Schäuble asked rhetorically during the conference in Frankfurt organized by the German central bank, the Bundesbank. “Go in front of Parliament and just do it, implement a measure.”
Vice Chancellor Sigmar Gabriel, leader of the Social Democrats, Ms. Merkel’s coalition partners, expressed hope that a compromise would be found now, but stressed that European interests are paramount. “It’s not a case of bringing Alexis Tsipras to his knees,” Mr. Gabriel said. “But it is certainly not that Europe should be brought to its knees.”