By Szu Ping Chan, and agencies 03 June 2015
Alexis Tsipras, Greece's prime minister, heads to Brussels for talks as Mario Draghi calls for "strong agreement" between Athens and its creditors
Greece faced a showdown with its creditors on Wednesday night as the country's prime minister headed to Brussels to try and break the deadlock between the two sides and secure a financial lifeline for the economy.
Alexis Tsipras called on creditors to show some “realism” as he travelled to Brussels to meet Jean-Claude Juncker, the head of the European Commission. It came against a backdrop of last-ditch demands and a threat from the Greek government that it would miss a €305m (£218.3m) repayment to the International Monetary Fund (IMF).
Mr Tsipras said he wanted to strike a deal that would let Greece escape from “financial asphyxiation” and put an end to “disaster scenarios” in Greece, including the risk of his country being ejected from the single currency.
He described Greece’s proposals as “a fair and mutually beneficial compromise, which will put an end to this crisis in Europe... put an end to the Grexit scenarios and put an end to the disaster scenarios”.
Both sides have issued ultimatums in their bail-out talks and Mr Tsipras is expected to respond to the terms of the creditors’ plan.
“So far, we have not received any comments regarding our proposal, or about any other document, from the institutional partners,” he said in a statement before leaving Greece.
Alexis Tsipras will meet Jean-Claude Juncker later today
A spokesman for the Greek government warned on Wednesday that the country "will not pay" the €305m it owes the IMF this week unless Athens reaches a deal with its creditors in the next few days.
"If there is no prospect of a deal by Friday or Monday ... we will not pay," said Nikos Filis told Mega TV.
Officials have warned for months that a default could ultimately push Greece out of the single European currency and unleash possible turmoil on world markets.
Mario Draghi, the president of the European Central Bank (ECB), called for a "strong agreement" between Greece and its creditors that balanced "social fairness" with "fiscal sustainability", as he warned that some of Syriza's proposals were also unrealistic,
Angela Merkel, the German chancellor, said on Wednesday that policymakers were working on a deal with "high intensity”, while Francois Hollande, the French president, described a deal as "a few days or hours away", as he also called for a balanced deal with Greece. "Asking too much of Greece could stifle growth. But asking too little would have consequences for the euro zone as a whole," he told an audience in Paris.
According to the Financial Times, creditors will demand that Greece posts a primary surplus of 1pc of gross domestic product (GDP) this year, rising to 3.5pc in 2018.
Mr Draghi said it was right that any deal put forward by creditors should take into account the recent deterioration in the Greek economy.
Asked if Greece's primary surplus targets should be lowered to factor in the recent performance, Mr Draghi said: "Yes, definitely. The current downgraded perspective for growth of the Greek economy should be taken into account in determining what the appropriate surplus should be."
He said Greece could explore the option of "bundling" all four repayments due to the IMF this month, which total €1.6bn, into one big payment. Mr Draghi referred to Zambia's use of the IMF provision, which was created by the Fund in the 1970s.
Asked several times during his regular ECB press conference if progress on a deal had been made, Mr Draghi said he would not offer a "real time report on how negotiations were going". He added that he would not attend a meeting between Mr Tsipras and Jean-Claude Juncker, the head of the European Commission, on Wednesday evening.
"Both the Greek government and the institutions have sets of proposals that they are confronting with each other. Mr Draghi stressed that governing council of the ECB wanted Greece to remain in the euro, on the basis that the two side would come to a "strong agreement" that promoted growth "social fairness, social responsibility and address[es] financial stability concerns".
"A strong one produces growth, is fiscally sustainable and addresses factors in the financial sector, this would be the component of a strong agreement," he told reporters. "Some of the things discussed in previous months are clearly fiscally unsustainable."
Euro group chief and Dutch foreign minister Jeroen Dijsselbloem is expected to attend the meeting with the two men
Talks between Mr Tsipras and Mr Juncker later today are not expected to produce a final deal on Greece's bailout, Mr Juncker's spokesman said.
"We do not expect any final outcome tonight, this is a first discussion not a concluding one," said Margaritis Schinas, his spokesman, saying that the meeting between the two men, due to be held in Brussels at 6.30pm GMT, was a "personal invitation".
"This is the moment for the negotiations to concentrate on the essential. The essential is the remaining few issues where there are still differences," added Mr Schinas.
He declined to confirm that Euro group chief and Dutch foreign minister Jeroen Dijsselbloem would attend too, amid reports that Mr Tsipras did not want the hardliner at the talks.
Mr Juncker said earlier that his meeting with Mr Tsipras still had some hurdles to overcome.
"I still have some problems to sort out in connection with what we call the Greek case, which will require me to hold various meetings today, including one with the Greek prime minister," the EC president said.