Creditors make ‘positive evaluation’ of Greek debt proposals: EU source

Greek PM Alexis Tsipras attends his party's parliamentary group meeting at the Greek parliament.
Greek PM Alexis Tsipras attends his party's parliamentary group meeting at the Greek parliament.AFP

BRUSSELS (AFP) - Greece’s international creditors believe its latest debt proposals are positive enough to be the basis for a new bailout worth 74 billion euros (S$111 billion), an EU source said Friday.

“There has been positive evaluation of the Greek programme,” the source said, with the EU’s bailout fund, the European Stability Mechanism ready to consider putting up 58 billion euros plus 16 billion euros from the International Monetary Fund for what would be a third debt rescue.

The source, who asked not to be named, said the creditor’s assessment of the Greek plan would now go to the Eurogroup of 19 euro zone finance ministers who meet Saturday, but it stood only a “50-50” chance of approval due to opposition by hardliners such as Germany who oppose any debt relief for Athens.

The finance ministers in turn will prepare a report for euro zone leaders who meet Sunday, followed by an emergency summit of heads of government from all 28 EU member states.

The Greek parliament is expected to vote shortly on the package of reforms left-wing Premier Alexis Tsipras promised his EU peers in return for a new bailout to save Greece from crashing out of the euro zone.

Tsipras rejected a similar plan last month, sparking an immediate crisis over his country’s finances as the creditors – the EU, the IMF and the European Cental Bank pulled the plug on the country’s second debt rescue.

In the latest proposals for a three-year programme, Tsipras gave ground on major sticking points, including creditors’ demands to overhaul pensions, increase sales taxes and commit to major privatisations.

Tax breaks for Greece’s islands and cuts to military spending remain sticking points, as do his demands that the creditors offer some relief on the country’s 320-billion-euro debt mountain.

Greek Finance Minister Euclid Tsakalotos said Friday he believed “many” of the demands for debt relief would be accepted by the euro zone.

He said he was confident Greece would be permitted to roll over a debt of 27 billion euros in bonds held by the ECB to the ESM, helping to reduce the cost to the government.

The reforms proposed by the Greek government have sparked criticism from hardline members of the radical left ruling party Syriza, but most opposition parties have expressed willingness to back them.

A majority of lawmakers from Syriza and other parties earlier on Friday granted their approval in a committee vote.

The full plenary session vote is expected to be held early Saturday morning.

"If the current deal comes to pass, it will be a difficult deal," new Finance Minister Euclid Tsakalotos warned lawmakers.

But he added that the government wanted parliament's approval "to strengthen the country's bargaining position, to achieve better terms in the agreement."

The latest reform proposals put forward by Athens were cheered by France and Italy on Friday, raising hopes that a last-ditch compromise can be reached to prevent a "Grexit."

In them, Greek Prime Minister Alexis Tsipras concedes ground on major sticking points, including creditors' demands to overhaul pensions, increase sales taxes, and commit to privatisations.

But the proposed measures limit changes on other thorny issues, including tax breaks for Greece's islands and cuts to military spending.


Tsipras hopes his new offer will open the door to creditors discussing another round of relief from Greece's suffocating €320 billion (S$475 billion) mountain of debt.

The proposal aims to procure financing "for three years, debt adjustment and a front-loaded investment package of €35 billion," a Greek government source said.

But the Greek leader also risks alienating large numbers of the ruling party's supporters, who rejected in a national referendum last Sunday a very similar set of proposals put forward by Greece's creditors.

Some 8,000 people gathered in Athens ahead of the parliamentary vote to protest against carrying on with austerity measures, police said.

In a bid to head off a possible challenge to the measures within his hard-left party Syriza, Tsipras urged his lawmakers "to stand united and firm in front of these important decisions."

Tsakalotos said Friday he believed "many" of his country's demands for debt relief will be accepted by euro zone partners whose ministers will meet Saturday.

He notably expressed confidence that Greece will be permitted to roll over a debt of €27 billion in bonds held by the European Central Bank to the European Stability Mechanism, which would push back repayments.

Any new Greek rescue needs to be approved unanimously by euro zone members.


French President Francois Hollande said "the Greeks have shown a determination to want to stay in the euro zone because the programme they are presenting is serious and credible."

However, he cautioned that "nothing is decided yet."

Italian Prime Minister Matteo Renzi declared himself "more optimistic" that a deal would be done.

But Germany, leading a bloc of sceptical euro zone nations, said the outcome of crisis talks this weekend was "completely open."

Germany leads a bloc of euro zone nations saying that, after two bailouts over the past five years totalling €240 billion, and €107 billion in debt forgiveness in 2012, Greece is looking like a bottomless money pit.

The possibility of a breakthrough sent stock markets soaring in Europe, Asia and the US on Friday.

Meanwhile the euro briefly rose above US$1.12 for the first time in July before falling back slightly in later trade, still up at US$1.1152.


Eurogroup chief Jeroen Dijsselbloem promised that euro zone finance ministers will make a 'major' decision Saturday on whether to endorse the latest proposals from Athens.

"We have to make a major decision. Whichever way," Dijsselbloem, who is also the Dutch finance minister, told reporters ahead of a Cabinet meeting in The Hague.

"But we have to see whether the proposals will genuinely help pull Greece from the doldrums," he added, two days ahead of a summit of EU leaders on Sunday.

Parliaments in several EU nations, notably Germany, will also have to vote on whether to accept Greece's reform plan in exchange for another huge bailout - its third in five years.

Tsipras is taking a political gamble by making any concessions to creditors' demands.

Hardliners in Syriza and coalition partner the Independent Greeks have obstinately rejected further austerity.

But although Greek voters last Sunday roundly voted "No" to accepting tough austerity terms for a bailout that expired June 30, they are alarmed at capital controls that have closed banks and rationed ATM cash.

They also overwhelmingly want to keep the euro.

"The government has to find a deal with its European partners no matter what. We didn't vote 'No' to leave the euro zone," said a pensioner in Athens, Nikos Eftekidis.

But another pensioner, Giorgos, said the "government's proposed measures are very tough, I wasn't expecting that. That's not what the Greeks voted for."