Weekend scramble to avert Greek exit

EU leaders, creditors get together to work out 'mutually beneficial' solution

Luxembourg - European Union (EU) leaders and Greece's creditors headed into a flurry of behind-the-scenes weekend diplomacy before high-level meetings to unlock aid for the nation flirting with default.

With markets closed, the weekend gave negotiators trying to avert a Greek exit from the euro zone some room to lay out a road map for what will be a high-stakes week with an emergency summit of EU chiefs tomorrow.

"We will try to supplement our proposal so that we get closer to a solution," State Minister Alekos Flabouraris told Greek Mega television in a morning news show.

"We are not going there with the old proposal. Some work is being done to see where we can converge, so that we achieve a mutually beneficial solution."

The clock is running down on a June 30 deadline to make payments and work out a new deal amid disagreements on pensions, sales tax and a deficit target.

"I want to say very clearly on expectations, that the summit meeting on Monday can only be a decision-making summit if a basis for making decisions is there," German Chancellor Angela Merkel said at a Christian Democratic party event in Berlin last Friday.

Greece is running out of last chances. The euro area bailout expires at the end of this month and that's when about 1.5 billion euros (S$2.3 billion) is owed to the International Monetary Fund (IMF).

"We need to get rid of any illusions that there will be a magic solution at the leaders' level," European Union president Donald Tusk said last Friday.

"We are close to the point where the Greek government will have to choose between accepting what I believe is a good offer of continued support, or to head towards default."

Flying back from a visit to Russian President Vladimir Putin, Greek Prime Minister Alexis Tsipras hunkered down in Athens with his closest advisers to come up with a game plan.

His country was given a few more days of breathing space by the European Central Bank (ECB), which last Friday increased again the maximum amount of emergency funding that Greek banks can access.

Tomorrow, the ECB will revisit that emergency funding as depositors continue to flee Greek banks. About 1.85 billion euros was withdrawn last Thursday and Friday alone, according to a person familiar with the matter.

"We are in the midst of great turbulence," Mr Tsipras said in St Petersburg. "But we are a nation of seafarers, who know how to deal with storms, and aren't afraid to sail to distant oceans to uncharted waters in search of a safe harbour."

The 40-year-old leader, contending with hardliners in his Syriza party who do not want him to capitulate to creditors' demands, has escalated the rhetoric in search of a better deal.

He was expected to speak by phone with European Commission chief Jean-Claude Juncker yesterday to try to break the deadlock.

After their meeting last Thursday ended in frustration, European finance ministers will convene again tomorrow, before the summit of leaders that could determine the future of the euro zone and Greece's place in it.

While Greece has a little less than two weeks left before the bailout window shuts, the need for some parliaments to sign off on any agreement means it is already too late for them to access aid in time to pay the IMF about 1.5 billion euros at the end of the month, according to Mr Jeroen Dijsselbloem, who leads the group of euro-area finance ministers.

To get at least some money, Greece will now look to extract an extension of its bailout agreement at the summit tomorrow.

Bloomberg, Reuters

A version of this article appeared in the print edition of The Sunday Times on June 21, 2015, with the headline 'Weekend scramble to avert Greek exit'. Subscribe