The Greek government and the European Commission dug in Monday on who should make concessions to keep the country from default, with Athens rejecting accusations that it was being obstinate and insisting it was Brussels that needed to be more realistic.
“It is not a matter of ideological stubbornness. It has to do with democracy,” Greek Prime Minister Alexis Tsipras said in a statement Monday, following talks between a Greek delegation and Commission officials over the weekend that ended with the Greeks walking out after 45 minutes. “We will wait patiently till the institutions adhere to realism.”
But Mario Draghi, head of the European Central Bank, was clear about who had to move first. “The ball lies squarely in the camp of the Greek government to take the necessary steps,” he told the European Parliament’s Committee on Economic and Monetary Affairs.
It was an unpromising start to a defining week for the Greek debt crisis. The hope is that eurozone finance ministers in the Eurogroup will be able to thrash out detailed proposals in Luxembourg on Thursday — if their political leaders can close the gap first. International Monetary Fund Managing Director Christine Lagarde will also attend, even though her negotiators have pulled out of the technical-level Brussels talks in frustration at Greece’s delaying tactics.
At a meeting of German Chancellor Angela Merkel’s Christian Democrats, EU commissioner Günther Oettinger, warned that there would be chaos in Greece if no deal were reached by the end of the month. On June 30, the Greek government owes €1.6 billion in bundled payments to the IMF and has its back against the wall to reach a deal to unlock a final €7.2 billion tranche from its second bailout package, which expires that day.
“We should work out an emergency plan because Greece would fall into a state of emergency,” said Oettinger, the commissioner in charge of the digital economy in the EU and a senior figure in the CDU, adding that essential services such as power supplies, medicine and police pay needed to be ensured.
“I think the Commission needs to work out a plan that could avert a worsening of the situation in the event that Greece leaves the eurozone, in the event of a bankruptcy,” he said.
The European Commission said the Greek reform proposals are €2 billion short of what is required by its creditors, represented by the European Central Bank, the International Monetary Fund and the Commission.
The Commission’s idea of what Greek reforms should look like was presented by economic spokeswoman Annika Breidthardt, who defined the “five main pillars” as a “sizeable and credible” fiscal adjustment committing to a primary surplus target of 2 percent of GDP in 2016 and 3.5 percent in 2018; reform of tax and customs to combat evasion; measures to bolster the financial system and tackle non-performing loans; structural reforms in the labor market; and anti-corruption measures to clean up the public sector.
The mood is turning glum. The main index of the Athens Stock Exchange was down 5 per cent on Monday while the yield on 10-year Greek bonds was on track for its highest close since late April. In a bid to calm the tense atmosphere, Tsipras’ chief spokesman Gabriel Sakellaridis told reporters in Athens on Monday that the government believed “there will be an agreement and there won’t be any problem with repaying the IMF at the end of June.”
But Panos Kammenos, the Greek defense minister and leader of Syriza’s nationalist coalition partner Anel, told Greek TV: “We are not going to surrender democracy, nor our parents, the Greek men and women pensioners who are now living under the poverty line. We have made a huge effort to find a solution. It is now up to them.”