Tsipras, Juncker meet in bid to break deadlock
Prime Minister Alexis Tsipras and European Commission President Jean-Claude Juncker held high-stakes talks in Brussels on Wednesday where the Greek premier was expected to defend his proposal for a deal with creditors aimed at restoring crucial liquidity to the debt-racked country while creditors push a rival proposal that contains tough measures.
Before setting off for Brussels on Wednesday, Tsipras said his talks with Juncker would focus on “the Greek government’s proposal” for a deal with creditors. He said Athens remained focused on reaching an “honorable and mutually acceptable compromise” with creditors that would keep Greece solvent and in the euro. But he indicated again that creditors should do more and called on the “the political leadership of Europe to yield to realism” and “do what is necessary.”
Later in the day, Tsipras spoke by telephone with French President Francois Hollande and German Chancellor Angela Merkel. Greek government officials said the three leaders agreed on the need for lower primary surplus targets for Greece and for a quick deal. Speaking from Paris earlier in the day, Hollande appeared upbeat, saying, “It is a matter of a few days or even hours from a possible settlement.” But other European officials were skeptical. German Finance Minister Wolfgang Schaeuble said what he had gleaned of Greek plan only confirmed his skepticism. In an interview published in Wirtschaftswoche weekly, meanwhile, Schaeuble accused SYRIZA of making false promises to voters, by leading them to believe that “there is a simpler way to stay in the euro, a way without major reform efforts.”
Eurogroup President Jeroen Dijsselbloem, who was also in Brussels on Wednesday, was typically reserved, saying that although the meeting was “important,” “I am not expecting a deal this evening.”
At a policy meeting in Frankfurt, European Central Bank President Mario Draghi said he wanted Greece to stay in the euro but stressed that any deal reached “should be a strong agreement” that leads to “growth and social fairness.”
Greece needs a deal quickly as its coffers are all but dry and it faces a series of debt repayments to creditors in the coming weeks, starting with a 300-million-euro payment to the International Monetary Fund on Friday. The spokesman for SYRIZA’s parliamentary group, Nikos Filis, caused a stir on Wednesday when he said that Greece will only pay the IMF on Friday if there are imminent prospects for a deal. According to sources, Greece has the money to pay this week’s repayment and possibly next week’s too. But Greece could make good on threats to not pay the IMF if creditors do not offer Greece ways to boost liquidity such as by raising the ceiling on the amount of T-bills that Greek banks can buy.
According to sources, the basic tenets of the creditors’ proposal to Greece include primary surplus targets at higher levels than those foreseen by Athens which would require the government to enforce 3 billion euros in revenue-raising measures. Specifically, creditors envisage a primary surplus of 1 percent of gross domestic product this year, 2 percent next year and 3 percent in 2017. Although lower than the original targets – of 3 percent for this year and 4.5 percent next year and in 2017 – they are significantly higher than Greece’s desired targets of 0.6 percent this year and 1.5 percent in 2016.
The creditors’ proposal also foresees cutbacks to state subsidies of pensions – of about 450 million euros for this year – and insists on the enforcement of labor and pension reforms agreed with the previous government; in practice, this means the government would have to put a brake on plans to restore the minimum wage and would likely need to impose a so-called zero deficit clause, which prohibits the state from covering pension fund deficits.
As regards value-added tax reform, the creditors foresee two rates – at 11 and 23 percent – with medicine, food and hotels going in the lower of the two. Greece has pressed for three rates – at 6, 11 and 23 percent.
