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Greek talks ‘go backwards’ as default looms

BRUSSELS, Belgium – Greece and its EU-IMF creditors failed to break the deadlock in emergency talks on Thursday to reach a bailout deal, raising fresh fears of a default by Athens that could send it crashing out of the euro.

Eurozone finance minister talks that had been supposed to pave the way for EU leaders to sign an accord at a summit in Brussels broke up abruptly with no agreement on a Greek financial reform plan.

Marathon meetings between leftist Prime Minister Alexis Tsipras and the heads of the European Commission, European Central Bank and International Monetary Fund, Greece’s main creditors, also ended with no deal.

“We have not made the necessary progress. In some areas one even gets the impression that we have moved backwards,” Germany’s hardline Chancellor Angela Merkel told reporters.

Asia’s leading stock markets slid Thursday as traders awaited the outcome of the fast-changing negotiations while most European markets ended steady after a riding a rollercoaster of small gains and drops.

Greece needs creditors to unlock the remaining funds in its bailout to pay a 1.5 billion euro ($1.7 billion) debt payment to the IMF, but the lenders have refused until Greece agrees to new spending cuts and reforms.

Tsipras, whose radical Syriza party won elections in January after promising Greeks it would end five years of bitter bailout-imposed austerity, insisted that a deal was still possible.

“After the comprehensive Greek proposals, I’m confident we’ll reach a compromise that will help the eurozone and Greece to overcome the crisis,” Tsipras said as he arrived at the summit.

He was later seen laughing and joking with Merkel and Italian Prime Minister Matteo Renzi.

EU President Donald Tusk — who last week warned of the growing risk of a “chaotic, uncontrollable Grexident” — said on Thursday that he saw the possibility of a “happy end” to the talks, comparing them to a drama by the Greek playwright Sophocles.

But there were few smiles among the finance ministers after their talks broke up, with sources saying they were likely to meet again on Saturday, which would be their eleventh set of talks since the stand-off began.

German Chancellor Angela Merkel, right, speaks with Greek Prime Minister Alexis Tsipras, left, and Italian Prime Minister Matteo Renzi.
Alain Jocard/AFP

All speculation

The creditors have insisted on reforms to pensions and VAT as well as cuts to defence spending before they release any of the remaining 7.2 billion euros in Greece’s 2012 bailout fund.

Differences between the two sides were so wide that despite two days spent to strike a compromise, EU-IMF creditors and Greece admitted failure and tabled rival reform plans to worried eurozone finance ministers.

Greece’s outspoken Finance Minister Yanis Varoufakis said some of his counterparts had also “criticized not only our text but also the text of the [creditor] institutions.”

Tsipras had been up for much of the night locked in talks with Christine Lagarde of the International Monetary Fund, Mario Draghi of the European Central Bank and Jean-Claude Juncker of the European Commission.

The IMF meanwhile said that it believes Greece will make the payment scheduled for June 30.

Talk of a default is “all speculation, because we’re expecting the payment to be made on June 30th and that’s what the Greek authorities have said publicly,” said Fund spokesman Gerry Rice.

New plans submitted Sunday by Greece aim make an eight billion euros in savings, mostly through new taxes on the wealthy and businesses, VAT increases and a cut in defence spending.

But in counter-proposals handed to Greece on Wednesday, creditors are calling for further measures on retirement, value-added tax for restaurants, and for defense expenditure to be slashed by 400 million euros instead of the proposed 200 million euros.

Greece’s banking system has been kept afloat by cash injections from the ECB as wary Greeks withdraw their deposits, but on Thursday, the Bank of Greece did not request extra liquidity from the ECB, reflecting a stabilization in the withdrawals.

Athens has also warned any accord would need to be approved by parliament before June 30, which risks splitting Tsipras’s Syriza party, where many on the left wing view him as reneging on campaign promises.

Any Greek agreement will also need to deal with what comes next, with EU officials suggesting an extension of the bailout until the end of the year, followed by a possible third aid package to keep Greece afloat.

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