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Bailout drama: Greek 'counter-proposals' seek to end deal deadlock

Greece will make "counter-proposals" on a deal to unlock vital bailout funds on Saturday, after eurozone officials said they had discussed the possibility of Athens defaulting if the talks fail.

business Updated: Jun 13, 2015 11:05 IST

Greece will make "counter-proposals" on a deal to unlock vital bailout funds on Saturday, after eurozone officials said they had discussed the possibility of Athens defaulting if the talks fail.

Greek officials have so far rejected what they characterise as "pressure" from creditors, and will send a senior delegation to Brussels to submit its own plans on Saturday to try and end a five-month standoff.

The heated exchange took place a day after the International Monetary Fund's negotiating team flew back to Washington from Brussels because of major differences, with a June 18 deadline looming for a deal.

The Athens stock market dropped 6% after it emerged that senior Eurozone officials meeting in Bratislava on Thursday had war-gamed "worst case" scenarios of Greece not being able to pay its bills.

"In discussions, a default was mentioned as one of the scenarios that can happen when everything goes wrong," a Eurozone official told AFP on condition of anonymity after the Bratislava talks.

Another official added, "It was a preparation for the worst case. Countries wanted to know what was going on."

The long-running saga over Greece's refusal to agree on reforms demanded by its creditors is set to reach a climax at a meeting of finance ministers in Luxembourg on June 18.

A deal to unlock the last €7.2 billion ($8.1 billion) of Greece's international bailout is needed next week to give national parliaments time to approve it before the bailout expires on June 30.

Greece faces a huge €1.6 billion payment to the IMF at the end of the month and a further €3.4 billion to the European Central Bank on July 20.

Member states are "increasingly raising questions on what are the possible ways forward in this situation," said Valdis Dombrovskis, the European Commission vice-president for the euro.

"We have to evaluate all the possibilities," Lithuania's finance minister Rimantas Sadzius told AFP.

Ratings Cuts

Standard & Poor's on Friday, meanwhile, lowered the rating of Greece's four big banks, and said in a statement that the lenders "will likely default in the next 12 months in the absence of an agreement between the Greek government and its official creditors".

German Chancellor Angela Merkel said all sides involved had to keep talking to reach an agreement, adding that "where there's a will there's a way", despite Berlin's hardline stance on Greece.

Underlining the growing frustration with Athens, a new poll showed a majority of Germans now want Greece out of the Eurozone.

A narrow majority (51%) of Germans who voted on polls this week by ZDF television said they are opposed to Greece still sharing the single currency. Six months earlier, only 33% were against.

Greek defence minister Panos Kammenos insisted that a deal "will come about by June 18 or never", while minister of state Alekos Flambouraris, a close associate of Prime Minister Alexis Tsipras, added, "I hope (an agreement) comes very soon, on June 18, when the Eurogroup convenes."

Eurogroup chief Jeroen Dijsselbloem, the Dutch finance minister who heads the group of 19 Eurozone finance ministers has insisted it was "unimaginable" to do a deal without the IMF, whom Athens accuses of trying to pressurise other creditors.

"If the IMF walks out... then part of the programme's financing will be gone and then we no longer have a base," he said, adding that the Fund's involvement was indispensable.

A government source in Athens, however, said the IMF "was pushing in all directions, and mainly in the direction of Berlin, to apply harsh policies in Greece so that it can get its money back".

There have been reports of divisions between the hardline IMF and the EU, with the Washington-based lender said to be keen on Europe wiping out some of Greece's debt.

European sources have told AFP that Greece and its creditors are debating a possible extension of the current Eurozone bailout programme, which expires at the end of June, until March 2016.

First Published: Jun 13, 2015 10:54 IST