Greece slams creditors as hopes dim for debt deal

24th June 2015, Comments 0 comments

Greek Prime Minister Alexis Tsipras lashed out at his country's creditors ahead of critical talks Wednesday, denting hopes of a final debt deal to prevent Athens from defaulting and leaving the euro.

The leftist leader flew to Brussels for a crunch meeting with the heads of the European Commission, International Monetary Fund and European Central Bank before eurozone finance ministers try to thrash out an agreement.

But at the last minute Athens said it had rejected new proposals that the EU-IMF lenders had issued in response to the eleventh-hour reform plan submitted by Greece this week to win approval for vital bailout funds.

Hardline Germany said there was a long way to go before any deal, while eurozone stocks dipped over doubts that an accord will be ready for EU leaders to rubber-stamp at a summit on Thursday.

"This strange position maybe hides two things: either they do not want an agreement or they are serving specific interests in Greece," Tsipras said just minutes before the talks.

"The repeated rejection of equivalent measures by certain institutions never occurred before -- neither in Ireland nor Portugal," he tweeted, referring to bailouts to those two countries.

Greece and its creditors have been locked in a stand-off since the radical Syriza party was elected in January, with the EU-IMF demanding reforms before unlocking the last 7.2 billion euros ($8.1 billion) of Greece's bailout before it expires on June 30.

- Time running out -

But time is running desperately short for Greece, which is set to default on a 1.5 billion euro IMF loan repayment also due at the end of the month if it does not get fresh funds within days.

EU President Donald Tusk warned last week of the risk of a "chaotic uncontrollable Grexident" -- Greece crashing out of the single currency and possibly even the European Union.

The new plans submitted Sunday by Tsipras's anti-austerity government aim to raise eight billion euros, mostly through new taxes on the wealthy and businesses, VAT increases and a cut in defence spending.

But in their counter-proposals, creditors are calling for early retirement to be abolished and an increase in the retirement age from 62 to 67 by 2022, not 2025.

They are sticking to demands for a 23 percent value added tax rate for restaurants, instead of the current 13 percent. Athens is fearful of the consequences to its valuable tourism sector.

Creditors also propose to increase the level of corporation tax to 28 percent, instead of the Greek plan to raise it to 29 percent from 2016 onwards. The current level is 26 percent.

And they want defence expenditure to be slashed by 400 million euros instead of the proposed 200 million euros.

Germany insisted that a deal was "unimaginable" without the hardline IMF, believed to be behind the harshest of the measures, on board.

"Our impression is that we have a long way to go," finance ministry spokesman Martin Jaeger said.

- 'Lot of work' -

The divisions meant that talks of the Eurogroup of finance ministers from the 19-country single currency area were set to stretch late into the night, ahead of a summit of leaders of all 28 EU nations on Thursday and Friday.

"There is a lot of work to do," Eurogroup head Jeroen Dijsselbloem told reporters.

Greece's banking system has been kept afloat by cash injections from the ECB as wary Greeks withdraw their deposits, and on Wednesday it increased for the fifth time in eight days emergency liquidity funds.

The Greek government meanwhile warned that any accord would have to be approved by a parliamentary majority before June 30, which risks splitting Tsipras' Syriza party, where many on the left wing view him as reneging on campaign promises.

Any Greek deal 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.

The two huge bailouts since the Greek crisis erupted in 2010 have left it with debt totalling nearly 180 percent of its annual economic output.

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© 2015 AFP

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