Creditors set out bailout ultimatum for defiant Greeks, sources say

Greece’s international creditors will put their own final proposal for a cash-for-reform deal to avert a Greek default to euro zone finance ministers for approval on Thursday after Athens let a deadline pass, euro zone officials said.

> one senior European official said.

The lenders had given leftist Prime Minister Alexis Tsipras an ultimatum to come up with a credible reform plan by mid-morning (0900 GMT), saying they would otherwise send their own version to Eurogroup ministers.

The dramatic move came hours before European Union leaders meet in Brussels for a summit on migration, the long-term future of the euro zone and renegotiating Britain’s membership terms, that has been overshadowed by the Greek debt crisis.

A Greek official said Athens was standing by the proposals submitted on Monday with the inclusion of some modifications made during negotiations this week.

The heads of the European Commission, International Monetary Fund and European Central Bank set Tsipras the deadline to come up with a new, workable proposal of reforms to unlock new funding and avert a debt default next Tuesday.

Tsipras left European Commission headquarters smiling and flashing a thumbs-up sign after three hours of meetings on Thursday but made no comment.

Euro zone finance ministers, known as the Eurogroup, were to meet again at 1130 GMT after cutting short a meeting on Wednesday evening because there was no draft agreement to discuss.

Diplomats said the lenders’ tactics reflected exasperation at Tsipras’s refusal to compromise on key reforms of pensions, labour markets, wages and taxation, which cross his Syriza party’s self-declared >.

Greek officials close to the talks say the government has already compromised on its red lines by offering to raise taxes and pension contributions. They say the lenders showed a lack of will to do a deal by changing estimates of how much each measure they propose could raise, making it difficult to come up with an acceptable offer.

Without a cash-for-reform deal in the next 48 hours, the chances of Greece averting a default to the IMF look slim.

Failure to repay 1.6 billion euros owed to the IMF on Tuesday could trigger a bank run and capital controls, followed by a slide out of the single currency area.

Austrian Finance Minister Hans Joerg Schelling, a hardliner on Greece, said the ultimate deadline for a deal was Sunday, a day before a German parliament sitting that would have to approve the release of aid to meet the IMF payment.

> Greek politicians in Tsipras’ party continued to be defiant.

> Nikos Filis, Syriza’s parliamentary spokesman, told Mega TV.

He said the Greek side was maintaining its insistence on debt relief as part of any accord, in comments that were echoed by Labour Minister Panos Skourletis.

> Skourletis said in an interview with state broadcaster ERT.

Frustration was palpable on both sides, with one euro zone official describing the loss of trust in the Greeks as > and questioning whether an agreement was realistic given the intransigence from Athens.

In Frankfurt, a source familiar with ECB deliberations said powerful German Bundesbank chief Jens Weidmann had expressed concern about the continued provision of emergency liquidity to keep Greek banks afloat despite deposit flight.

ECB policy-setters held the limit on this emergency funding for Greek banks steady for the second day running after weeks of increases.

Positive signals earlier in the week, when the Greek government submitted a new list of proposals, mostly involving increases in tax and social security deductions, have given way to a growing belief that an accord is slipping away, although seasoned diplomats cautioned that in EU negotiations the situation always seems bleakest before a last-gasp deal.

Negotiators have been unable to produce an agreed draft text due to lingering differences over pension reform, taxation, labour law, public sector wages, the opening of closed professions, and investment.

Among the most crucial unresolved issues are Greek demands for debt restructuring, differences over reforming Greece’s costly pensions system and Athens’ focus on tax hikes versus spending cuts.

The latest Greek proposals, made in a five-page document on Monday, featured a series of tax rises on consumption, businesses and the wealthy, as well as higher contributions to pensions to meet budget targets.

> IMF chief Lagarde told French magazine Challenges on Wednesday.

The more concessions Tsipras makes, the more resistance he will face in parliament within his coalition and on the streets, where recent protests, some organised with Syriza’s support, have underlined opposition to yet more belt-tightening.

> Dimitris Papadimoulis, a Syriza lawmaker at the European parliament, tweeted on Thursday morning.