Ian Traynor in Brussels Thursday 9 July 2015
Troika of bailout supervisors to receive proposals from Athens by midnight on Thursday, giving them 48 hours to examine them before summit on Sunday
The head of the International Monetary Fund (IMF), Christine Lagarde, has reiterated that the global financial institution can not bend its rules when it comes to Greece.
Greece is under intense pressure to table a last-chance blueprint for radical economic reform, tax increases and spending cuts on Thursday in order to secure a future in the euro and stave off financial collapse.
The reform proposals are to be sent to Greece’s creditors with negotiations at the critical stage. The embattled Greek prime minister, Alexis Tsipras, accused his Eurozone creditors on Wednesday of exploiting his country as an “austerity laboratory” for the past five years while formally asking Europe for three more years of rescue funds.
This is really and truly the final wakeup call for Greece but also for us, our last chance
Donald Tusk, European council president
The countdown to Greece’s financial collapse shifted into its gravest phase after European leaders set Sunday as the deadline by which Tsipras has to capitulate to their menu of cuts, tax rises and fundamental reforms of the Greek economy in return for bailout money. Otherwise, EU leaders said, Greece will be cut off from the Eurozone, triggering banking chaos, insolvency, and likely an exit from the single European currency.
With the five-year crisis entering a climactic five days, much will hinge on the details of the reforms that Athens is to send to the troika of bailout supervisors on Thursday. The European Central Bank, the International Monetary Fund and the European commission are to receive the details by midnight on Thursday, giving them 48 hours to examine them, negotiate, and reach a verdict before another European summit on Sunday either blesses the proposed deal or focuses on plans for coping with a new Greek currency and how to mitigate the expected post-euro humanitarian crisis in Greece.
Tsipras sounded characteristically defiant in his first big speech – to the European parliament in Strasbourg – outside Greece in almost six months in office. He declared that justice was above the law, repeated that his victory in securing a rejection of EU austerity in a snap referendum on Sunday did not mean Greeks wanted to quit the euro.
The days of treating Greece as an “austerity laboratory” were over, he vowed. “The experiment was not a success. Poverty has soared, and so has public debt.
“We have now been given a mandate to redouble our efforts in order to get a socially just and economically sustainable solution,” he said. “Europe will be democratic or it will have immense difficulties surviving.”
Leaders of the other 18 countries in the Eurozone have been angered by Tsipras’s regular emphasis on “democracy”, arguing that they, too, are the servants of their own democratic public opinion and that if referendums were held in Germany, Finland or the Netherlands, Greece would be unceremoniously ejected from the currency rather than receiving €240bn in loans.
Athens applied for a new three-year loan agreement from the European Stability Mechanism, the Eurozone's permanent bailout fund. It will need at least €50bn. Optimistically, this will take more than a month to arrange and will face difficult parliamentary passages, especially in Berlin. In the short term, with Greek banks closed and fast running out of cash, ATM withdrawals limited to a daily €60, and the government unable to meet debt repayments, Athens also needs short-term bridging loans to tide it through the next few weeks. It is also demanding debt relief measures included in a new deal.
“As part of broader discussions to be held, Greece welcomes an opportunity to explore potential measures to be taken so that its official sector-related debt becomes both sustainable and viable over the long term,” said the bailout letter from the new finance minister, Euclid Tsakalotos.
European leaders told Greece it has five days to agree a reform plan, or face leaving the single currency
The creditors’ response to the Greek plea will be determined by the raft of austerity measures that Athens offers to commit to on Thursday when it is also to announce pension reforms and a VAT revamp, long some of the biggest sticking points in five months of stalemated negotiations.
The lenders’ terms for the new three-year rescue package, as the German chancellor, Angela Merkel, made clear in Brussels on Tuesday evening, will be even tougher than those rejected in last weekend’s referendum, adding to the mood of pessimism over a breakthrough.
The breakdown in trust between Tsipras and his Eurozone partners is so severe that it is difficult to see how it can be rebuilt in time to salvage the situation by Sunday.
“This is really and truly the final wakeup call for Greece but also for us, our last chance,” said Donald Tusk, the president of the European council. Uniquely among EU leaders, Tusk blamed both sides for the looming disaster. “Seek help among your friends and not among your enemies. And if you want to help your friend in need, do not humiliate him.”
The collapse in confidence in the Greek authorities was evident in the response to the Tsipras speech when mainstream parliament leaders assaulted the prime minister, while the anti-EU far right, notably Marine Le Pen of France’s Front National and Nigel Farage, the UK Independence party leader, applauded the radical leftist.
Marine Le Pen, right, speaks at the European parliament. Photograph: Jean-Francois Badias/AP
“The euro and austerity are Siamese twins. Your people will not escape from austerity without leaving the euro,” Le Pen told Tsipras.
The strongest and most detailed contribution came from the liberals’ leader and former Belgian prime minister, Guy Verhofstadt. “You have to come forward with your reform programme. This is not a chicken and egg discussion. It is your choice,” he told the Greek leader.
“How do you want to be remembered? As an electoral accident who made its people poorer? Or as a real revolutionary reformer? Show that you are a real leader and not a false prophet.”
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The parliament session allowed speakers to let off steam and to grandstand. It was also valuable for allowing Tsipras to make his case to a non-domestic audience in public for the first time.
But the parliament makes no decisions on Greece, is a bystander in the negotiations, and has no powers whatsoever in the debt crisis, unlike, for example, the German Bundestag which would need to endorse any new agreements with Greece.
Observers wondered why Tsipras, during such momentous and fateful days for his country, could spend almost a whole one of them in Strasbourg.