Thursday 27 October 2016

Greek u-turn as Tsipras accepts original bailout terms

Greek Prime Minister Alexis Tsipras (front) is welcomed by European Commission President Jean Claude Juncker for a meeting ahead of a Eurozone emergency summit on Greece in Brussels, Belgium in this June 22, 2015 file photo
Greek Prime Minister Alexis Tsipras (front) is welcomed by European Commission President Jean Claude Juncker for a meeting ahead of a Eurozone emergency summit on Greece in Brussels, Belgium in this June 22, 2015 file photo

Greek Prime Minister Alexis Tsipras has written to international creditors to accept a bailout offer published on June 28, with several conditions, the Financial Times reports.

In the letter, Tsipras asked to keep the VAT discount for Greek islands, delay an increase in the pension age and delay the phasing out of a solidarity grant to pensioners, the paper reported on its website.

But Euro zone officials said a letter sent to creditors by Greek Prime Minister Alexis Tsipras on Tuesday contained conditions for Athens' acceptance of a loan offer that at least some governments would find hard to accept.

The letter said Greece would accept terms published by the European Commission on Sunday but with a number of amendments, including maintaining a reduction on value-added tax for Greek islands and maintaining a pension supplement for the richest beneficiaries for the time being.

"There are still a lot of loose ends," one euro zone official said. "The letter mentions, for example, reform of the labour market from autumn. It's just one sentence, not more.

READ MORE: Greece becomes first developed country to default to the IMF

"I don't think the Eurogroup still believes those promises just like that. By the way, they're asking for the extension of a programme which has already expired.

The letter to its international creditors to help solve its debt crisis has brought no further clarity, German Finance Minister Wolfgang Schaeuble said.

"That did not provide further clarity," said Schaeuble, adding there was "no basis" for serious negotiations with Athens at the moment.

"First of all, Greece must be clear about what it wants," said Schaeuble at a news conference to present German budget plans.

Any talks on a new programme would have to start from scratch with different conditions, he told a news conference in Berlin.

Mr Schaeuble also said it was not clear whether a new bailout could be arranged for Greece before Athens is due to repay €3.5bn of bonds to the European Central Bank on July 20.

"I won't make any predictions about that," he said at a news conference to present the German budget.

"We're open to anything," he added.

He said the legal situation was completely different now and "we need to, if necessary - there is willingness to do this - develop a completely new programme under completely different conditions."

The Tsipras letter contained only a single sketchy reference to labour market reform, which was one of the creditors' demands to make the Greek economy more competitive.

"The new framework will be legislated in autumn 2015," it said without saying what measures it would contain. Tsipras' leftist government wants to restore collective bargaining rights scrapped under previous bailout-driven reforms, and opposes a demand to make collective layoffs easier in the private sector.

Tsipras did agree to implement immediately a range of measures recommended by the Organisation for Economic Cooperation and Development to ease doing business and open up closed business sectors.

The letter, which seeks an extension of the bailout which expired overnight, made no mention of privatisations, which the Tsipras government halted on taking office and which remain a bone of contention.

The Eurogroup of euro zone finance ministers will hold a conference call at 1530 GMT on Wednesday to discuss the Greek issue.

Finance Minister Yanis Varoufakis told colleagues the ruling Syriza party might even urge Greeks to vote "yes" in Sunday's plebiscite if Athens is granted a loan, participants said.

An opinion poll published on Wednesday showed the "no" camp in the lead after Tsipras urged voters to reject conditions he called humiliating, but it also showed the gap had narrowed after the government had to shut the banks and impose capital controls.

European Commission President Jean-Claude Juncker was engaged in intensive efforts to persuade the leftist Greek government to accept reform commitments close to those it rejected last week to avert an economic meltdown and possible exit from the euro zone.

The Eurogroup is due to hold a conference call at 1530 GMT on Wednesdsay.

However, there is deep scepticism among Greece's partners about any rushed deal to lend more money to a country that on Tuesday became the first advanced economy ever to default on the IMF, missing a €1.6bn debt repayment.

Earlier this week, in Germany, Greece's biggest creditor, a senior lawmaker in Chancellor Angela Merkel's conservative bloc accused Greece of misleading Europe and said it would be wrong to grant a loan now.

"All interim measures without conditionality, without reforms are not serious and no basis for talks," Hans Michelbach of the Bavarian Christian Social Union told Deutschlandfunk radio. "We should not go along with this deliberate game to sow confusion being played by the Greeks... Europeans should not be led up the garden path."

French Finance Minister Michel Sapin, who has been Greece's strongest sympathiser in the euro zone, told RTL radio: "The aim is to find an agreement before the referendum if possible... But it's dreadfully complicated."

"It isn't the Germans who are the toughest. It's the little countries that have made big sacrifices in recent years which are saying 'don't ask my people to help you again when my standard of living is lower than yours'," he said.



The ECB's policymaking governing council was to meet in Frankfurt to decide whether to maintain, increase or curtail emergency lending that is keeping Greek banks afloat despite a wave of deposit withdrawals and the state's default.

Germany's Bundesbank was leading hawks who argue that the ECB cannot go on providing funds through the Greek central bank as before to lenders that are backed by an insolvent sovereign.

One possible move would be to increase the "haircut" charged on Greek government bonds presented as collateral for funds in light of the IMF default.

Greek banks have been shuttered for the week, and cash withdrawals rationed to 60 euros a day after the ECB rejected a request at the weekend to increase liquidity assistance.

German Finance Minister Wolfgang Schaeuble, who has taken a hard line on Greece, took the unusual step of telling lawmakers he would advise the ECB not to raise liquidity to Greek banks, according to participants at a closed-door meeting. Berlin normally insists the central bank is independent and should not receive advice from politicians.

After Athens's peers rejected a last-ditch plea for an extension of its expiring bailout programme on Tuesday evening, Eurogroup chairman Jeroen Dijsselbloem said Greece was welcome to ask for new aid but it would come with conditions.

"What can change is the political stance of the Greek government that has led to this unfortunate situation," Dijsselbloem told Reuters.

Thousands of pro-European Greeks took to Athens' central Syntagma Square outside parliament on Tuesday evening to demand a "yes" vote to the bailout deal.

Carrying signs with messages like "We will not become the last Soviet state" and chanting "Greece! Europe! Democracy!", the demonstrators braved heavy rain to rally in support of a "Yes" vote.

The demonstration matched a rally of similar size for the "No" camp a day earlier, as supporters of both sides sought to build up momentum before Sunday's referendum.

A poll by the ProRata institute published in the Efimerida ton Syntakton newspaper showed 54 percent of those planning to vote would oppose the bailout against 33 percent in favour.

However a breakdown of results between those polled before and after Sunday's decision to close the banks and impose capital controls showed the gap narrowing.

Of those polled before the announcement of the bank closures, 57 percent said they would vote "No" against 30 percent who would vote "Yes". However among those polled after, the "No" camp fell to 46 percent against 37 percent for "Yes".

From across the Atlantic, the United States said it was watching the situation closely and urged new talks to clinch a deal for Greece that would make its debt sustainable - a veiled reference to support for some form of debt rescheduling.

"The United States will continue to encourage all parties involved to press forward with negotiations that put Greece on a path toward economic growth within the Eurozone on the basis of needed economic reforms and requisite financing that achieves debt sustainability," a U.S. Treasury statement said.

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