(The Guardian) — In advance of the third meeting of eurozone finance ministers in less than a week, Tsipras was summoned to the office of Jean-Claude Juncker on Wednesday to try to thrash out remaining differences.
Christine Lagarde, the head of the International Monetary Fund, Mario Draghi, the president of the European Central Bank, and Jeroen Dijsselbloem, the Dutch finance minister who runs the Eurogroup committee of finance ministers, are to confront Tsipras over his tax raises and spending cuts tabled on Monday in the hope of avoiding default next week.
Wednesday’s Eurogroup meeting was aimed at preparing an agreement that would be rubber-stamped by an EU summit on Thursday, averting the eurozone’s first default next Tuesday and keeping the currency bloc intact.
But the mild euphoria that characterised frantic diplomacy and another eurozone summit in Brussels on Monday dissolved swiftly on Tuesday as it became clear that Lagarde found the proposed temporary resolution inadequate and that German chancellor Angela Merkel was also having second thoughts.
Lagarde, who kept a low profile at the summit, was said to have strong reservations about the proposed agreement on ideological terms opposed to the hard-left Tsipras government, but also because she does not think the putative agreement will put Greece on the road to recovery.
Sources familiar with Merkel’s thinking said the German leader faced a potential party revolt over extending a further lifeline to Greece without confidence it would succeed.
Greece’s eurozone bailout expires next Tuesday when it is also due to repay €1.6bn to the IMF. But there were growing signs on Tuesday that the creditors would not be rushed into a deal they view as inadequate.
Senior eurozone sources said the IMF payment on Tuesday could be easily fixed and that Tsipras might have to call a referendum in Greece on whether to stay in the euro.
The sudden switch from hope to gloom is likely to affect the financial markets and reverse the mini-boom euphoria of the past two days while accelerating bank run tendencies and raising the pressure for the imposition of capital controls.
Greek insiders described the Tsipras summons to Brussels as “a very critical meeting”. “It is not a good sign,” said veteran political commentator Pavlos Tzimas.
As doubts deepened among the creditors, the Greek government came under intense domestic political pressure last night over its concessions. Tsipras faced criticism from within his coalition government over compromise proposals that would raise €8bn by increasing pension contributions, phasing out early retirement, hiking corporation tax and raising some rates of VAT.
The government’s junior coalition partner, the small, rightwing Independent Greeks party, added to the complications for Tsipras by warning it would only support an agreement that included some form of debt write-off. Greece’s creditors are not expected to make such a commitment this week. Panos Kammenos, Anel’s leader, added that his party would oppose a VAT increase for Greek islands “even if the government falls”.
By Tuesday night it was unclear whether the Greek leader would be able to contain the dissent or even pass an agreement through parliament, regardless of whether a deal is reached in Brussels.
Earlier on Tuesday, the European Central Bank agreed to inject nearly €1bn into the Greek banking system, the third consecutive working day that Greece has received emergency help from the ECB’s emergency liquidity assistance programme in order to stave off bankruptcy as depositors take billions of euros out of accounts.
The European commission is also dangling the prospect of €35bn in financial aid for Greece if a deal is made. “I want ordinary Greeks to know we are offering €35bn to help the economy,” said Juncker.
Earlier, optimism among investors that Greece would avoid a chaotic default boosted stock markets. Greece’s main index ended the day up more than 6%, while the French and German exchanges gained more than 1.2% and 0.7% respectively. In London, the FTSE 100 was flat, while Japan’s Nikkei index hit a 15-year high.