Greek talks stall over 'red lines' as country fights to remain in Eurozone

By Szu Ping Chan, and agencies 03 May 2015

Greek government says it is confident a deal can be struck, but creditors remain at loggerheads with Athens over labour market reforms

Greece has reportedly shown willingness to compromise in the latest round of negotiations, which are due to end tonight Photo: Bloomberg

Talks between Greece and its creditors have stalled after the two sides failed to reach an accord on reforms needed to unlock vital financial aid and secure the country’s future in the Eurozone.

Following days of intensive negotiations, government spokesman Gabriel Sakellaridis told reporters that he was still confident a deal would be struck, even though the International Monetary Fund remains at loggerheads with the leftist government over labour market reforms.

Athens is scrambling to strike a deal with its creditors that will release a €7.2bn (£5.3bn) bail-out tranche and prevent the country from defaulting on its debts.

While there were indications that Greece was more willing to compromise in the latest round of negotiations, which are will resume on Monday, officials remain sceptical that an agreement will be reached before May 6, when the European Central Bank will discuss emergency liquidity for Greek banks.

Reports claimed the government was prepared to reduce at least three different VAT rates to one, and limit exemptions. Prime minister Alexis Tsipras had opposed the move, claiming that the change would hit poorer people. The country will also press-on with privatisations it had also previously vowed to block, according to reports.

However, Syriza has said that demands by creditors to reverse an increase in the minimum wage and cut pensions remain “red lines” that the leftist leadership is unwilling to cross.

“There is progress, but also many open questions,” a source representing the institutions of the European Commission, the European Central Bank and the IMF told the DPA news agency in Germany. “On some questions, there is considerably more willingness to compromise [from Greece] but we cannot say how much longer we will need.”

Greece's Finance Minister Yanis Varoufakis is photographed during a May Day rally in Athens (Photo: Rex)

 

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Mr Sakellaridis said that failure to reach an “honest compromise” with creditors would most likely lead to a referendum.

“It’s clear that we need an interim agreement as soon as possible to unclog the situation,” he said. “The continuation of this uncertainty benefits neither Greece nor Europe.”

Greece is due to repay €200m to the IMF on Wednesday and a further €750m later this month. Protesters, including Greek finance minister Yanis Varoufakis took to the streets last week to protest against the repeated rounds of austerity that have been imposed on Athens by Brussels.

Mr Varoufakis denied reports that he had been sidelined by Athens following a meeting of Eurozone finance ministers last month which he described as "intense".

Mr Varoufakis claimed “nothing had changed” and said he was still “toiling for an agreement” that would satisfy Greece, where the unemployment rate stands at 25pc.

However, Dora Bakoyannis, a member of the opposition New Democracy party and former foreign affairs minister, said the government’s brinkmanship tactics had set the country up for disaster.

“Greeks gave Syriza a mandate to negotiate, not to bankrupt the country,” she told the right-leaning Eleftheros Typos newspaper, adding that new elections or a referendum would either be a “disastrous development [or] a tombstone for the country’s economy.”

In a separate development, German president Joachim Gauck suggested that Germany should reconsider Greek compensation demands for the Nazi occupation of the country during World War II.

"It's the right thing to do for a history-conscious country like ours to consider what possibilities there might be for reparations," he told Sueddeutsche Zeitung.

While Angela Merkel’s government is ruling out further war reparations for Greece, saying the matter was closed by Europe’s acceptance of the treaty that reunified East and West Germany in 1990 at the end of the Cold War, Mr Gauck said Germany should explore compensation for war crimes committed by German soldiers during the war. “It’s the right thing for a historically aware country like ours to explore which possibilities of compensation there might be,” the newspaper quoted him as saying.

The comments were welcomed by Greek parliament president Zoi Konstantopoulou, who highlighted that this was the first time the issue had been raised in such an official way.

Greek talks stall over 'red lines' as country fights to remain in Eurozone - Telegraph