Creditors warn Greece must step up its proposals on bailout

Greece’s European creditors have made it clear that the country has to improve its offers in ongoing bailout talks if a meeting among leaders on Wednesday in Brussels is to yield a breakthrough.

There was anticipation over a meeting between Greek Prime Minister Alexis Tsipras, German Chancellor Angela Merkel and Frances Francois Hollande on the sidelines of a European Union-Latin America summit.

The meeting comes after Greece made new proposals to end a standoff in talks with its bailout creditors. But the EUs executive Commission says the offers are still not good enough to unlock 7.2 billion euros ($8.2 billion) in bailout funds that Greece needs to pay its debts at the end of the month.

“For this final push, the Commission is of the view that the ball is clearly now in the court of the Greek government,” Commission spokesman Margaritis Schinas said.

Merkel said only that “If the Greek prime minister wants to talk to us, we will obviously do so.”

The lack of visible progress in the negotiations over the past weeks has revived fears Greece could default on its debts and drop out of the euro, a move that would create huge uncertainty for Europe and global markets.

“The goal is to keep Greece in the eurozone,” Merkel said. “Where there is a will, there is a way.” Yet she insisted it was up to Tsipras first and foremost to show that willingness.

Greece has three weeks left to conclude a deal with its creditors before its bailout program expires at the end of the month, when it will also have to repay about 1.6 billion euros ($1.8 billion) to the International Monetary Fund.

French President Francois Hollande also said he stood ready to meet with Tsipras if need be and stressed the importance of reaching a deal.

“We must be quick. We must not let things drag out,” Hollande said.

Athens is at odds with its creditors over what reforms Greece must make in return for the bailout loans. Each side has submitted its own proposals. But talks have been deadlocked since Athens rejected the creditors’ suggestions as irrational last Friday, saying they would make life harder for Greeks already reeling from five years of deep spending cuts and soaring unemployment.

Tsipras delivered a proposal to the head of the European Commission President Jean-Claude Juncker last week, which the government updated and sent to the EUs economic affairs commissioner, Pierre Moscovici, on Monday. A Greek negotiating team has remained in Brussels for discussions.

Athens said it did not receive a response to its proposals until Wednesday afternoon.

Schinas, on the other hand, said Moscovici had informed the government Tuesday afternoon “that their latest suggestions do not reflect the state of discussions” between the sides.

Schinas said the Commission’s vice president, Vladis Dombrovskis, has said there is flexibility to replace certain measures proposed by the creditors with measures that have a similar impact on public finances, “especially in the areas of VAT (sales taxes) and pensions.”

However, Schinas noted, Dombrovskis has stressed the importance of agreeing on overall targets for Greeces primary surplus — the budget excluding debt and interest payments. Athens has been arguing for lower primary surpluses than creditors demand, saying that insisting on high primary surpluses curtails the amount of funds that can be spent on the country and causes unnecessary hardship.

Tsipras’ radical left Syriza party won elections in January on promises of repealing the harsh budget austerity measures that accompanied Greeces 240 billion euro bailout program.

With the country facing a severe cash crunch, he has agreed to make some concessions, although he insists he will not cross certain “red lines,” such as imposing further pension and salary cuts.

Tsipras must also face down hardliners within his own party, many of which have called for a break in relations with creditors and for Greece to go it alone, even if it means leaving the euro.