Greece retreated from budget concessions to its creditors, setting the stage for another attempt by German Chancellor Angela Merkel and French President Francois Hollande to break the country’s financing deadlock.
With Greece’s financial safety net expiring on June 30, Prime Minister Alexis Tsipras plans to meet the leaders of the euro area’s two biggest economies in Brussels on Wednesday. Any remaining bailout funds are off limits unless Tsipras reaches an accord with creditors.
The three-way meeting, which may take place after the first day of a summit of leaders of European Union and Latin American countries, signals the urgency in keeping Europe’s most-indebted country solvent. All the more so because talks this week have failed to make progress, according to an official directly involved in the process.
“We want Greece to stay in the euro, but whether this is achievable depends entirely on Greece,” Volker Kauder, caucus leader of Merkel’s bloc in parliament, said in Berlin. “The conditions have to be met.”
Disagreements persist on fiscal targets and the measures needed to achieve them, the person said, asking not to be named as he wasn’t authorized to speak publicly. Greece rejected the proposal hammered out by creditors last week, stripping the process of a way forward, the official said.
With talks stuck, it may fall on Europe’s leaders to bring about a breakthrough. Merkel and Hollande stepped up their involvement last month, going over the heads of euro-area finance ministers.
Markets have seesawed amid speculation that a deal was imminent or on the verge of collapse. Yields on notes due 2017 fell 29 basis points to 25.37 percent at 9:24 a.m. in Athens. Greek shares rose for the first time in four days on Tuesday, with the Athens Stock Exchange General Index up 0.6 percent.
Stocks, which open at 10:30 a.m., have plunged almost 26 percent since early December when a presidential campaign started and ultimately catapulted the anti-austerity coalition to power. Greek bonds are the worst performing of all sovereign securities tracked by Bloomberg’s World Bond Indexes this year.
Greece’s latest proposal, presented Tuesday, falls short of the budget targets that Tsipras agreed on in a June 3 meeting with European Commission President Jean-Claude Juncker, an EU official said. Greece didn’t dispute those objectives in its subsequent meetings with creditor institutions last week, the official said.
European Commission Vice President Valdis Dombrovskis said an “agreement within the coming days is possible.” Greece could find “fiscally equivalent measures” to replace some of the more disputed demands by creditors, he said in Strasbourg, France. “During the last days, really intensive technical work has been done, so it is possible to move forward.”
The Greek negotiating tactics are stoking frustration in Germany, where any changes in Greece’s bailout terms require backing by lawmakers. With legislators in her party bloc increasingly fed up, Merkel didn’t mention Greece during a speech Tuesday at a business conference in Berlin.
Tsipras’s government “hasn’t made a good impression on me in the last few days.” Thomas Oppermann, parliamentary leader of the Social Democrats, Merkel’s junior coalition ally, told reporters.
Almost four months after Greece agreed to an extension of its rescue agreement, the standoff between creditors and the anti-austerity coalition led by Tsipras’s Syriza movement risks leaving his country unable to meet payments. Greece has used a series of maneuvers to stay afloat, yet may be reaching the end of the line unless it accepts creditors’ conditions.
Under the latest Greek plan, Tsipras wants access to bailout funds left in the European Financial Stability Facility and for the country’s banks to be allowed to buy more of the state’s short-term debt, an international official said. Greece also requested funds from the European Stability Mechanism to repay about 6.7 billion euros ($7.6 billion) of bonds held by the European Central Bank that come due in July and August.
The official described the revised Greek plan as a vague rehash of earlier proposals and said it is not credible.
Last week’s Greece meetings appeared to make progress toward a deal, only to be followed by mutual recriminations. Tsipras called the creditors’ proposal absurd and Juncker said Tsipras had misrepresented the creditors’ position. [Bloomberg]