EU demands compromise as Greece considers bailout extension

EU leaders suggest Greece to reach agreement with international creditors as soon as possible while Athens considers bailout extension to March 2016

Photo by: Reuters
Photo by: Reuters

Updated Jul 28, 2015

The leaders of Germany and France as well as European Commission told Greece on Wednesday to agree with the creditors without losing time to unlock financial aid to which Athens desperately needed, but the Greek side was reported to have been considering a possible bailout extension until March of the next year.

German Chancellor Angela Merkel and French President François Hollande met with the Greek Prime Minister Alexis Tsipras on the sidelines of the EU-Latin American summit in Brussels on Wednesday in order to review Greek debt negotiations.

A German government spokesman said that the meeting had passed within a constructive atmosphere during which the parties have agreed to intensify the negotiations to reach a deal to avert a Greek default.

"It was agreed unanimously that the talks between the Greek government and the institutions [the IMF, European Commission and European Central Bank] should be pursued with great intensity," the spokesman said in a statement.

Tsipras reiterated the necessity of a viable solution to get rid of his country’s debt crisis for which Athens has long been striving to strike a deal with the Western lenders.

"We decided to intensify the efforts to bridge the remaining differences and proceed, I believe, to a solution in the coming period," Tsipras told reporters after the late-night talks.

"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.

Meanwhile, Greek media reported ahead of the EU-Greece meeting that Athens has been mulling over an extension of bailout negotiations until next year spring for winning more time to come up with a comprehensive reform plan after five months of fruitless talks.

The request is believed to be presented tonight by Tsipras to his German and French counterparts in Brussels, according to an official Greek source.

"We are discussing an extension of the current programme by nine months to March 2016," the Greek source said.

Tsipras submitted a new reform proposal on Tuesday to its international lenders in hope of reaching a deal and unlocking bailout funds before it's too late.

The initiative taken on the proposal marks a further attempt by Greece to compromise with its lenders and restore its battered relationship with them.

Greece and its international debt creditors have agreed to expire the negotiations due June 30 after the Greek side declared that it would not be able to fulfill repayment of 300 million euros to the International Monetary Fund (IMF) on a June 5 deadline.

Athens has been negotiating with its international creditors, the IMF and the European Central Bank (ECB), over the past four months about the release of some 7.2 billion euros in aid.

The country is heavily indebted to the EU and the IMF, almost 240 billion Euros, since the eurozone economic crisis seriously hit the country’s economy from 2009 to the present.

Greece’s left-wing Syriza Party could have so far not agreed on a number of issues, such as debt restructuring, a lower target for the primary surplus to take in more than it spends apart from debt interest payments, and a pledge to make no further cuts to pensions or wages.

All of those issues were said to be Athen’s red lines which the Greek side seemed reluctant not to abandon during the several months of debt negotiations.

But the leftist government has recently agreed to raise the Value Added Tax (VAT) and offered a higher surplus target in order to weigh down the rising tension with its creditors.

Before the general election, Tsipras’ Syriza Party had vowed to terminate the EU’s unilateral financial acts over Greece, but in reality the Syriza Party has so far continued to review Greece’s financial stability in order to get new bailout money from the Union.

As the negotiations straddled mostly due to the upbeat tone of the Greek government, Greece’s already dying financial stability raised concerns and skepticism of the international crediting institutions.

Standard & Poor's decided to downgrade the country’s credit rating one notch further into junk territory to triple-C from CCC+ on Wednesday, as the international creditor stated that Greece is very likely to default in one year unless Athens seal a deal with its lenders.  

The move reflects "our opinion that in the absence of an agreement between Greece and its official creditors, the Greek government will likely default on its commercial debt within the next 12 months," the S&P said in its report.

Three months have remained for Greece to negotiate with the ECB and IMF to conclude an agreement on the proposed deadline when it will also have to repay about 1.6 billion euros to the IMF.

Finance ministers from 19 eurozone countries will be gathered next week in Luxembourg to discuss the Greek repayment issues which are enormously important to keep Athens inside the eurozone  as well as the future of the monetary union.

"The goal is to keep Greece in the eurozone," Merkel said. "Where there is a will, there is a way," she added.


TRTWorld and agencies