Greece’s international creditors - the International Monetary Fund (IMF), the European Central Bank (ECB) and the European Commission will put their own final proposal for a cash-for-reform deal to prevent a Greek default, a eurozone official said. "If Greece says 'no go' now, it could be the final straw," the European official added.
After Wednesday’s talks failed to reach a deal, the creditors gave Greece an ultimatum to bring up a workable reform plan by mid-morning, saying they would otherwise send their suggestions to the Eurogroup.
The revised proposal, seen by Reuters, extends the deadline by which Greece would have to completely phase out a pension supplement, called EKAS, by two years to 2019, compared with the previous position of the creditors.
The creditors also agreed that a value added tax reform that scraps lower VAT exemptions for islands and raises VAT on restaurants and hotels could be reviewed at the end of next year.
The ultimatum came only a couple hours before European Union leaders meet in Brussels for a summit on migration and Britain’s membership terms, however, these topics have been overshadowed by the Greek debt crisis.
While lenders are expecting Greece to accept proposals offered by the creditors, Greek officials say the government has already compromised on its “red lines” by offering to raise taxes and pension contributions.
They also state that lenders showed no will to reach a deal by changing estimates of how much each measure they propose could raise, making it difficult to bring up an acceptable offer.
Additionally, Greek politicians accused international creditors. Nikos Filis, Syriza's parliamentary spokesman said "the lenders' demand to bring annihilating measures back to the table shows that the blackmail against Greece is reaching a climax."
Tension rose on both sides, as one eurozone official described the loss of trust in the Greeks as “extreme.”
Unless Greece reaches a deal in the next 48 hours, there is a high chance that Greece will not be able to avoid a default. If it fails to pay €1.6 billion to the IMF on June 30, a bank run and capital controls are likely to happen, followed by an exit of the single currency area.
Negotiators have been unable to reach a deal due to lingering differences over pension reform, taxation, labor law, public sector wages, the opening of closed professions, and investment.
The global markets have been assuming this week that a deal would eventually be reached. Upon European officials new proposal, European stocks rebounded on Thursday after falling to negative territory.
The pan-European FTSEurofirst 300 index was up 0.2 percent at 1579.43 points, while yields on top-rated German 10-year Bunds rose 4 basis points to 0.88 percent, having traded as low as 0.82 percent earlier.