HOPES OF a breakthrough between Greece and its creditors were dashed last night after a vital meeting of Eurozone finance ministers broke down after less than an hour.
Greek Prime Minister Alexis Tsipras and the country’s lenders had been locked in frantic negotiations ahead of the meeting to produce a draft proposal for ministers but failed to hit the deadline. US shares closed down nearly one per cent in late trading in response to events in Brussels.
Finance ministers will try to meet again today at 11am, with Tsipras and the creditors trapped in a race against time to reach a compromise ahead of the crunch meeting.
Tsipras is rushing to secure a deal with the trio of creditors to unlock a €7.2bn (£5.14bn) emergency bailout to stop the country defaulting on debt.
A set of Greek proposals submitted earlier this week were praised by European officials, causing shares in the country’s biggest banks to rocket by 20 per cent on hopes of a deal.
But the deadlock over pension cuts and tax hikes cropped up again when the reforms were sent back to Greece with a slew of adjustments.
The changes provoked an embittered response from Tsipras, who accused Greece’s creditors of foul play.
“The repeated rejection of equivalent measures by certain institutions never occurred before — neither in Ireland nor in Portugal,” he said.
“This curious stance may conceal one of two possibilities: either they don’t want an agreement or they are serving specific interest groups in Greece.” The creditors’ adjustments called for a sweeping overhaul of Greece’s pension reforms, with a faster rise in the retirement age to 67 and the end of a “solidarity grant” to poorer pensioners by 2018. They also want VAT on hotels and restaurants moved off the lowest rate of six per cent and hiked to the second highest 13 per cent rate, and no VAT discounts for Greek islands.
Tsipras was set to meet again with creditors late last night to try to hammer out a new draft of proposals ready for finance ministers, who are meeting tomorrow.
Without a deal, Greece’s current bailout expires on Tuesday. On this day, it risks missing a €1.6bn (£1.1bn) payment to the International Monetary Fund, which could result in it being considered to be in default. It also risks losing vital emergency lending to banks that relies on a deal being struck.
Louka Katseli, chairwoman of the Greece’s biggest retail bank, recently told City A.M. that if no deal was reached by Tuesday this would be “uncharted waters”.