While Greece is running out of cash and talks with its creditors have been deadlocked, German politicians continue to pressure the country to implement economic reforms, including pension cuts and labour market liberalisation.
German Economy Minister Sigmar Gabriel warned Athens in an interview that a third aid package would only be possible if Greeks made some changes.
German Finance Minister Wolfgang Schaeuble suggested on Monday that Greece might need to hold a referendum for the necessary economic reforms to be approved. But Athens has said it has no plans for a referendum at the moment. Economy Minister Gabriel emphasised that the Greek government needs to take action in any case, suggesting such a vote might speed up decisions.
Meanwhile, Tsipras warned foreign lenders that unless foreign creditors provide Athens with immediate liquidity they would not make the €750 million payment to the IMF in May, the Ekathimerini newspaper reported on Saturday. The newspaper cited European sources and said Tsipras made the threat in a May 8 letter to EU Commision President Jean-Claude Juncker, IMF head Christine Lagarde and ECB President Mario Draghi.
According to the newspaper, the letter was seen as “possible bluff” and strengthened the mistrust between Greece and its creditors.
On Friday Greek Prime Minister Alexis Tsipras said Athens found some common ground with its creditors, but the government would not back down from its red lines, like cutting wages or pensions.
However, it seems like Greece needs to “walk the red line” in order to get a deal with its creditors. The Greek government is coming close to a compromise with them, as new proposals have been sent to creditors over the weekend, Ekathimerini reports.
These include an overhaul of Greece’s value-added tax, while the solidarity tax on incomes above €30,000 will be retained and new taxes will be introduced. Also, pensions will be reformed: the government is working on proposing the scrapping of early pensions as an alternative to stopping public subsidies to pension funds altogether.
The Syriza government, however, has not answered the demands of its creditors on labour market reforms. This is seen as a deal-breaker if no compromise is made. The Greek government is holding out for collective labour contracts and refusing to allow group layoffs.