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Eurozone Leaders Meet on Greece After Finance Ministers Hit Impasse Eurozone Leaders to Meet on Greece After Finance Ministers Hit Impasse
(about 1 hour later)
BRUSSELS — Eurozone heads of state gathered here on Sunday, with just hours remaining to reach a deal to keep Greece in Europe’s common currency. BRUSSELS — With just hours remaining for a deal to keep Greece in Europe’s common currency, the leaders of the 19 countries that use the euro weighed plans on Sunday night that would require Athens to adopt a raft of economic policy changes within two days to assure skeptical creditors of the country’s ability to manage its finances and qualify for another bailout.
The leaders of the 19 European Union countries that use the euro are trying to accomplish what a day and a half of meetings by their finance ministers could not: a workable plan for resuming bailout negotiations with Greece, whose government is virtually out of money and whose banks are on the brink of collapse. As time ran down, the leaders were assessing a variety of options passed along to them by their finance ministers, including steps that Greece’s left-wing government, while desperate for a deal to pave the way for new funding, would probably find difficult to sell at home to voters who last week resoundingly rejected further austerity. These include selling as much as 50 billion euros’ worth of Greek state assets to reduce debt and having Greece temporarily leave the euro and use that time to restructure its debts.
The failure of the finance ministers to find a path forward when they met for nine hours on Saturday and reconvened Sunday morning indicated that any agreement to continue negotiations with Athens would be a largely political decision based on the goal of European unity, rather than an economic one. Going into the meeting, the leaders were deeply split, with some saying the priority was to hold Europe together and others suggesting that they had so little trust in Greece that a deal would be difficult if not impossible. Failure to find some compromise would threaten to throw into reverse for the first time a quest for ever-closer European unity stretching back more than half a century.
And it would require bridging a divide between eurozone countries, including Germany, that oppose further aid to Greece and those, including France and Italy, that say Athens still deserves a helping hand. The options being debated by the leaders amounted to demands that Greece move quickly and forcefully to reestablish trust and credibility with its creditors after years of failure to follow through on promised changes and months of bitter wrangling over the country’s need for more money to keep it afloat. But they also included the possibility of what a draft assessment of options by the eurozone finance ministers called “a timeout from the euro area,” accompanied by discussions about reducing Greece’s crippling debt load.
President François Hollande of France, heading into Sunday’s summit meeting, warned that failing to find a way to keep Greece in the euro would “mean a Europe that is in retreat, a Europe that no longer moves forward.” He vowed that “France will do everything to find an agreement this evening.” An assessment of Greece’s situation prepared over the weekend by the finance ministers put Greece’s financing needs at between 82 billion and 86 billion euros over the next three years. That sum is significantly larger than the €74 billion previously reported and is around €30 billion more than the €53.5 billion request made by Greece on Thursday for what would be its third bailout package since 2010. Greece already has more than €300 billion in debt.
Mr. Hollande continued: “The stake is to see whether Greece will tomorrow be in the eurozone, and the stake is Europe. It is not simply a question of deciding about Greece, though that is, of course, the subject of the day, but to mark out well the conception we have of Europe.” In a sign of the rapid pace of events, a full summit meeting of the European Union’s 28 heads of state planned for Sunday was abruptly canceled. But the separate meeting of eurozone leaders went ahead, enveloped by dark warnings from the French president and others that failing to help Greece would mean a perilous retreat from the principles that have guided Europe since the end of World War II.
Chancellor Angela Merkel of Germany, arriving for the summit meeting, acknowledged that the economic plight of Greece was “extremely difficult.” Arriving in Brussels for what was billed as a last chance summit on Greece after months of ill-tempered and increasingly divisive debate, President François Hollande of France warned that failure to find an agreement to keep Greece in the euro would “mean a Europe that is in retreat, a Europe that no longer moves forward.” France, he added, “will do everything to find an agreement this evening.”
But “the most important currency has been lost — and that is trust,” Ms. Merkel said. “That means that we will have tough talks today, and there will not be an agreement at any price.” Mr. Hollande told reporters: “At stake is whether Greece will tomorrow be in the eurozone and also at stake is Europe.”
The Greek prime minister, Alexis Tsipras, struck a conciliatory tone as he headed into the meeting: “I am ready for an honorable compromise. We owe it to the peoples of Europe who want Europe united and not divided. We can reach an agreement by tonight if all the parties involved want it.” Mr. Hollande’s pleas for European unity — joined in by Prime Minister Matteo Renzi of Italy — contrasted with a far more skeptical and hardheaded position on Greece staked out by Germany. This exposed a rift between Paris and Berlin — a tandem that has traditionally powered European decision-making — over how to deal with a Greek crisis that Donald Tusk, the president of the European council, has described as “the most critical moment in our history.”
Jean-Claude Juncker, the president of the European Commission, who has been a main broker between Greece and its eurozone creditors, was still pushing for a settlement heading in the meeting. “I will fight until the very last millisecond for a deal, and I hope that we will have a deal,” he told reporters. Sunday’s summit in Brussels followed a swirl of dramatic events that began last Sunday when Greek voters rejected further austerity measures in a referendum and then careered in the opposite direction on Thursday when Prime Minister Alexis Tsipras, leader of the radical left-wing party Syriza, submitted a plan to creditors that embraced tougher measures than those rejected by voters and his own party.
Greece’s most stalwart ally, Cyprus, which is only just recovering from its own brush with bankruptcy and a severe banking crisis in 2013, ruled out the possibility of a fracturing of the eurozone. But less sympathetic countries, which seem to be a majority, suggested this was a real possibility. The week’s whiplash-inducing turns have turned the once taboo issue of “Grexit,” as Greece’s exit from the euro — or potentially even the European Union — is widely known in Europe, into a serious possibility that has spooked ordinary Greeks and many others beyond its borders, including senior officials in the United States.
Banks in Greece have been closed since June 29, and cash machines could run out of money as early as Monday. Peter Kazimir, the finance minister of Slovakia, which has joined Germany in taking a hard line against Greece, told reporters on his arrival for Sunday’s talks that Greeks needed to know when banks would reopen “and in which currency.” With banks in Greece closed since June 29, and cash machines running out of money, possibly as early as Monday, the outcome of the Sunday showdown between leaders will weigh heavily on a decision in coming days by the European Central Bank on whether to increase or perhaps cut off emergency funding for Greek banks. Without an infusion of cash from the Frankfurt-based European bank, Greece’s banking sector will crumble and send the country crashing out of the euro.
Mr. Kazimir ruled out any prospect of an agreement among finance ministers, saying that “recommendations for the heads of state” were the most that could be expected when the eurozone leaders gathered on Sunday afternoon for a last-chance summit meeting. Chancellor Angela Merkel of Germany, arriving for the summit meeting, acknowledged that the economic plight of Greece was “extremely difficult” but said that “there will not be an agreement at any price.” She added: “the most important currency has been lost — and that is trust.”
“The breach of trust is so deep it is not possible to reach a deal,” Mr. Kazimir said, referring to the finance officials. Noting that “nerves are stretched tight,” the German leader demand a coolheaded review of the options to ensure that “the advantages outweigh the disadvantages and that goes for the future of Greece as well as for the eurozone as whole, and for the principles of our cooperation.”
A nine-hour meeting of eurozone finance ministers on Saturday broke off as Germany, Finland and Eastern European members expressed doubts that Greece could be trusted to live up to any commitments made in exchange for bailout assistance that might reach 74 billion euros, or nearly $82.6 billion. Germany’s stand, which is shared by a number of other countries, notably Finland and Slovakia, has stirred alarm that Ms. Merkel, who faces strong pressure from within her party, including from her own finance minister Wolfgang Schäuble not to give Greece more money without ironclad conditions, has put domestic political calculations ahead of Germany’s postwar commitment to the so-called European project. Mr. Schäuble is widely viewed in Greece as wanting the country out of the euro.
That finance ministers pressed Greece on Saturday to take swift action to prove that pledges made in its latest proposal to introduce tough austerity measures would be put into effect — and not left on the drawing board, as had happened with many previous Greek promises. Instead of softening their demands after the July 5 Greek referendum, Germany, Greece’s biggest creditor, and its supporters in northern Europe and the former Soviet bloc have pushed for further austerity and demanded that the Greek parliament pass legislation in the next few days to entrench Syriza’s pledges of action.
A failure to find a solution for Greece’s economic crisis could be the biggest challenge yet to European unity. Peter Kazimir, the finance minister of Slovakia, which has joined Germany in taking a hard line against Greece, told reporters in Brussels that Greece needed to move quickly so that its public could know when banks will reopen “and in which currency.”
If the eurozone leaders cannot reach an agreement to keep the Greek negotiations alive, the finance ministers and the European Central Bank might need to make contingency plans for addressing the social and economic fallout of the Greek crisis. A draft assessment prepared by eurozone finance ministers after yet another round of emergency weekend meetings in Brussels called on Greece to legislate separate sets of measures by July 15 that must include “the streamlining of the VAT system and the broadening of the tax base to increase revenue” as well as “upfront measures to improve long-term sustainability of the pension system as part of a comprehensive pension reform” program.
Last week, Mr. Juncker said that Europe would be prepared to extend “humanitarian” aid to Greece, if necessary. Greece would also need to legislate to ensure the independence of its state statistical agency, overhaul its civil justice system, and adopt European rules to ensure orderly closure of failing banks. And it would have to accept “continued full involvement” of the International Monetary Fund in overseeing any bailout, despite considerable animosity in Greece to the fund.
The options put forward for debate by leaders also included a temporary Greek exit from the eurozone, and using the proceeds from privatizations worth 50 billion euros to help pay down Greece’s huge debt. Those options were first put forward in a policy paper prepared by the German finance ministry.
Gianni Pittella, the president of the second biggest political bloc in the European Parliament, on Sunday accused Mr. Schäuble, the German finance minister, of seeking to push Greece out of the single currency. “His tricks and political games risk to lead Greece to bankruptcy and to Grexit,” Mr. Pittella, the leader of the Socialists & Democrats group, said in a statement, referring to the possibility of a Greek exit from the common currency. “Mr. Schäuble and his supporters would bear this historical responsibility in front of all the European people,” he said.
In an interview with a German newspaper to be published on Monday, the foreign ministry of Luxembourg, which this month took over the rotating presidency of the European Union, warned of a “catastrophe for Europe” if Germany pushed Greece into leaving the euro. Such a scenario, Jean Asselborn told Sueddeutsche Zeitung, “would be fatal for Germany’s reputation in the E.U. and the world” and lead to a “far-reaching conflict with France,” Berlin’s closest partner in Europe since 1945.
In an apparent reference to past enmities that drove France and Germany into the opposite sides of two world wars, Mr. Asselborn said “the responsibility of Germany is huge. It is now a matter of not summoning the ghosts from the past.”
Ms. Merkel has always come under pressure from the United States to keep Greece in the eurozone. A Greek government official said Sunday that ahead of the summit in Brussels, Greece’s prime minister, Alexis Tsipras, had spoken by telephone with Jack Lew, secretary of the Treasury.
Mr. Tsipras, whose radical left-wing party Syriza won elections in Greece in January on promises to end austerity, showed up in Brussels without a tie, as he always does for meetings with fellow leaders, but also without his customary broad smile. “We can reach an agreement tonight if all parties want it,” a grim-faced Mr. Tsipras said, adding that leaders owed this “to the people of Europe who want Europe united, not divided.”
Sunday’s summit followed an abortive effort by eurozone finance ministers to reach an agreement in nine hours of talks on Saturday and a second session of negotiations Sunday morning.
“We’ve come a long way but a couple of big issues still are open,” Jeroen Dijsselbloem, the president of the Eurogroup of finance ministers, told reporters after the ministers’ meeting ended. “We’re going to put those to the government leaders, and it’s up to them,” he said.