Greek Prime Minister Alexis Tsipras was under intense pressure to deliver crucial concessions to international creditors on Thursday to break a four-month deadlock and save his country from looming default that could pitch it out of the eurozone.
After late-night talks with the leaders of Germany and France produced no breakthrough, Tsipras was to meet European Commission President Jean-Claude Juncker in the afternoon to try to bridge remaining gaps on a cash-for-reform deal.
“At the end of the talks there was absolute unanimity that Greece will work intensively and full steam ahead … in the coming days to solve all remaining issues,” German Chancellor Angela Merkel said on arrival for the final session of an EU-Latin America summit.
The latest in a run of sleep-defying meetings in recent weeks was partly political theatre, as all involved try to show their commitment to a deal — and avoid any blame for failing to avert a crunch that could unsettle the euro and the world economy. Tsipras again said he saw a solution at hand.
A senior EU official who has previously been glum on the prospects of an accord said there was now a good chance that next week would bring an agreement acceptable to Eurogroup finance ministers, who meet in Luxembourg on June 18.
To clinch a deal, EU officials said Tsipras’s government needed to offer alternative savings and tax measures to replace proposed pension cuts and tax rises he rejected as antisocial, to deliver a modest fiscal surplus before interest payments.
People familiar with the talks said the two sides have come closer to agreeing a primary surplus target but are still wide apart on how to achieve it, with EU and IMF experts doubting that measures touted by Greece can do the job.
But Greek Finance Minister Yanis Varoufakis, sidelined from the talks after infuriating his euro zone counterparts, denied that Athens had agreed to a primary surplus target of 1 percent of gross domestic product sought by the creditors.
As ratings agency Standard & Poor’s downgraded Greek bonds deeper into junk status, questioning whether Athens can or wants to pay its debts, Tspiras emerged after midnight from talks with Merkel and President Francois Hollande to express confidence.
“I believe that Europe’s political leadership realises that we must offer a viable solution to Greece and the possibility to return safely to growth with social cohesion and with a sustainable debt,” he said.
Greek bank shares surged on Thursday, with a major Athens banking equity index enjoying its best performance in four months, on renewed expectations of progress in the talks.
The Athens Stock Exchange FTSE Banks Index jumped 14.2 percent, helping push up the broader Greek ATG equity index by 7 percent.
More dire warnings rained down on the Greek leader on Thursday as he contemplates what concessions to make to clinch a deal without alienating his left-wing supporters who elected him in January on promises to put an end to austerity.
“There is a strong determination to help Greece,” ECB policymaker Jens Weidmann, the hawkish chief of Germany’s Bundesbank, said in a speech in London. “But time is running out, and the risk of insolvency is increasing by the day.”
Weidmann said the main losers of a Greek default and exit from the euro zone would be Greece and the Greek people.
“The contagion effects of such a scenario are certainly better contained than they were in the past, though they should not be underestimated,” he said.
EU Economics Commissioner Pierre Moscovici urged Athens to come up with a list of economic reforms that could make a deal possible in the coming days. “I really like Greek tragedy, but now we must move to the happy ending,” he said.
French Finance Minister Michel Sapin said neither Greece nor its partners in the single currency area could afford for the talks to fail – an argument that irks Germany and its north European allies, which worry that it lets Athens off the hook.
Merkel had made clear before the meeting with Tsipras that Greece needed to satisfy the three institutions representing the creditors – the European Union, European Central Bank and International Monetary Fund – rather than seeking a political fix on softer terms from her and Hollande.
Tsipras renewed a call for a restructuring of Athens’ debts as part of any solution. The EU says that can only be considered after a deal to complete the existing bailout is secured.
Greece will be in default at the end of June without fresh funds to enable it to repay 1.6 billion euros to the IMF. It put off a smaller repayment last week under a rarely used IMF rule allowing it to combine all payments due in any month.
Tsipras has denounced creditors’ demands to scrap an income top-up for the poorest pensioners and to refrain from unilateral moves to reintroduce collective bargaining or raise the minimum wage – policies that are anathema for his Syriza party.
As if on cue, a Greek court ruled on Wednesday that the government should reverse cuts to private sector pensions it made in 2012 as a condition of its bailout agreement because the reductions deprived pensioners of the right to a decent life.
Brussels says he is free to put forward alternative measures provided the numbers add up and yield a primary budget surplus.
He faces pressure not just from left-wing hardliners but also from Greek voters, most of whom say they want to remain in the euro zone and want him to make concessions for a deal.
A poll showed a slight rise since April in the number who are dissatisfied with Tsipras’s negotiating performance with the creditors, reaching 53.4 percent from 50.5 percent.