BRUSSELS – Facing a looming default and even exit from the Eurozone if it fails to reach a deal with international lenders, Greek negotiators walked out of talks here only 45 minutes after they began on June 14, despite warnings the country will go under without more aid.
The storming out came a few days after the International Monetary Fund, which along with the European Union and European Central Bank makes up the troika of the EU-IMF-ECB that has put up 240 billion euros ($270.34 billion) in two bailouts since 2010, yanked its envoys and complained of Greek intransigence.
The Greek walkout came after Athens presented yet another in a long line of alleged reforms demanded in return for a long-delayed 7.2-billion ($8.1 billion) installment being held back until Prime Minister and Radical Left SYRIZA leader Alexis Tsipras breaks campaign promises and imposes more austerity measures he vowed to rejecte
The Financial Times said that an EU official who has seen the much-anticipated Athens counterproposal, long sought by negotiators representing Greece’s creditors said it was woefully inadequate, just as were all the previous outlines, and as Greece kept demanding money while promising little in return.
“While some progress was made, the talks did not succeed as there remains a significant gap between the plans of the Greek authorities and the joint requirements of [creditors],” said a European Commission spokesman. “The Greek proposals remain incomplete. On this basis, further discussion will now have to take place [June 17 in the Eurogroup.”
Officials briefed on the weekend talks said the two warring sides went at it again as the caustic talks have failed to produce a single inch of progress almost four months after Greece got a bailout extension that expires at the end of the month, raising the prospect of a default, Eurozone exit and capital controls.
Sigmar Gabriel, Germany’s Vice-Chancellor and head of the country’s Social Democratic party — long seen as the most conciliatory political group in Germany’s ruling coalition — wrote in the Bild newspaper that patience in his country, which has put up the bulk of the bailouts, was wearing thin.
“Greek movement [is] not discernible. I think they do not want a solution,” he said, reflecting a position among a strong minority in SYRIZA which wants Tsipras to reject troika demands and to leave the Eurozone and adopt a failed Soviet-style economic model such as that used in Cuba and Venezuela, where people stand in lines for foodstuffs, reflecting the most radical element in his party.
“The game theorists of the Greek government are in the process of gambling away the future of their country,” Gabriel wrote, in a dig at Greek Finance Minister, Yanis Varoufakis, an economist and blogger who identifies himself as an an academic expert on game theory.
“Europe and Germany will not let themselves be blackmailed. And we will not let the exaggerated electoral pledges of a partly communist government be paid for by German workers and their families,” Gabriel said in another sign that Greece could be left in the lurch.
The talks were scheduled after Greek ministers, who had traveled to Brussels on June 14, were told their final plan had to be submitted by the end of the weekend amid warnings it had to come up with a suitable list of reforms by June 18.
But Greece will never accept cuts in pensions and wages or extra taxes on necessities such as electricity, a government official said, rejecting those conditions as part of stalled talks aimed at getting release of additional loan monies from the troika.
The official said the troika is insisting on pension and wage savings worth about 1.8 billion euros ($2 billion) and an equal amount of extra revenue from Value Added Tax (VAT).
“These measures concern the popular classes and employees,” said the official, who spoke on condition of anonymity because of the ongoing talks in Brussels between Greece and its creditors.
He added that Greece will no longer accept measures that undermine growth and has submitted proposals that cover creditors’ demands for a primary budget surplus without doing so.
Greece and its creditors resumed talks on a bailout deal in Brussels June 13.
Greek officials were locked in talks with the country’s lenders over the weekend, with both sides having proposals on how a deal to unlock further bailout funding could be reached.
The Greek team in Brussels was led by Deputy Prime Minister Yiannis Dragasakis, State Minister Nikos Pappas and Alternate Minister for International Economic Relations Euclid Tsakalotos, where they met with a representative of European Commission President Jean-Claude Juncker.
Conspicuously absent was Yanis Varoufakis, who has been sidelined by Tsipras after iring Eurozone counterparts with a combative and antagonistic attitude and for failing to to deliver a credible list of reforms as a four-month bailout extension runs out at the end of the month.
Greece reportedly wants an additional nine-month extension and asked for the European Stability Mechanism to provide up to 27 billion euros for Athens to buy back the Greek bonds held by the European Central Bank so it could withdraw them and reduce its short-term funding needs.
The troika has put up 240 billion euros ($270.34 billion) in two bailouts since 2010 to save an economy ruined by decades of wild overspending and patronage hires of hundreds of thousands of needless workers in return for votes for ruling parties.
The Greek newspaper Kathimerini said that the troika favors an extension of the bailout program until September, with money Greece has already borrowed for bank recapitalization being used to cover its funding needs over the summer.
Athens had some 11 billion euros left over for this purpose but had to return it in February, when it signed the agreement for the current extension, which runs until the end of the month.
Creditors see some of this 11 billion euros (but not all, as banks could need further recapitalization) being used to cover its immediate needs, which include paying the IMF 1.6 billion euros ($1.8 billion) by the end of the month and covering two bonds worth 6.7 billion euros, which are held by the ECB and mature in July and August.
Government sources told Kathimerini that the delegation sent to Brussels was prepared to commit to cuts to higher pensions and public sector salaries, to introduce debt and deficit “brakes” through legislation and to create escrow accounts into which it will pay funds that can only be used to pay off public debt so there can be no doubts in the future about whether Greece has the money to pay its creditors, but that apparently fell through when the troika said it was inadequate, leading to the walkout.
The Greek government was reportedly close to agreeing with its lenders on the primary surplus targets for the next years. The troika wants it to be 1 percent of Gross Domestic Produc (GDP) this year, 2 percent in 2016, 3 percent in 2017 and 3.5 percent from 2018 onwards. Athens is also said to be prepared to increase revenue from value-added tax to the lenders’ target of 1 percent of GDP.
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