Brussels, 26/06/2015 (Agence Europe) - On Friday 26 June, several European leaders called on Greece and its creditors to come to an agreement, at the next Eurogroup on Saturday, on the reforms needed to bring the second Greek bailout plan to a successful conclusion and avoid Greece's default on 30 June, after the umpteenth “last chance” Eurogroup meeting ended in fresh failure on Thursday.
“We've had a long discussion”, said European Council President Donald Tusk, who asked head of the Eurogroup Jeroen Dijsselbloem to inform state leaders of the discussions. Tusk added that all the leaders were now aware of the situation and the potential consequences. A new eurozone summit will not be necessary, either on Friday or at the weekend, Tusk stated. According to several media, the issue of a plan B in case of failure would apparently have been addressed.
The European leaders firmly sent the ball back to the Eurogroup camp, the place where the final decisions will have to be taken. Germany's Chancellor Angela Merkel indeed said that the Greek issue was not the responsibility of the heads of state and government, although Greece insists that the negotiations should take place at the highest level. “Saturday's Eurogroup is of crucial importance. There's an emergency and we must come to a result on Saturday”, she added. The Italian and French leaders, Matteo Renzi and François Hollande, echoed these words of emergency.
On Thursday, the Eurogroup was again adjourned, again leaving the “institutions” (Commission, ECB and IMF) to take over the discussions (see EUROPE 11342). The Eurogroup had two issues on the table - a common position of the “institutions”, and a very last version of the Greek proposals. As Dijseelbloem said, the latter issue for discussion came in too late, it is now for the institutions to analyse them. This analysis will aim to see what compromises are possible in the light of the latest Greek proposals. A final compromise position could therefore be tabled on Saturday, and the objective will be to see if the eurozone countries “can live with it”, as well as the Greeks, according to a source.
During Thursday's Eurogroup meeting, the German finance minister, Wolfgang Schäuble, reportedly said that the “institutions” were too far away from the agreement of 20 February that extended the bailout plan for four months. “There are still some points to be clarified”, Merkel stated.
According to the creditors' plan given to the Eurogroup, which was published online by the Financial Times, the legal age for retirement would be raised to 67 by 2022, although the Greek paper submitted on Monday set the limit at 2025. The gradual elimination of EKAS, the allowance for the smallest pensions, would apparently be planned for the end of 2019. As regards VAT, the “institutions” would accept a rate of 13% for electricity, but the rate on restaurants and hotels would rise to 23%. The creditors also continue to insist on removing the VAT exemptions for the islands. According to a Greek source, the gap on VAT would apparently be around €400 million.
On the Greek side, it could not be ensured that the government would accept the creditors' proposals. On the Commission side, it is believed European Commission President Jean-Claude Juncker has used up all the wiggle room possible and even been criticised on both sides. Italian leader Renzi is nevertheless confident of an agreement.
On Saturday, the Eurogroup is expected to extend the Greek programme by five months until November. The expiry of the programme, on 30 June, coincides with the deadline for repaying €1.6 billion to the IMF. On Thursday, speaking from Washington, IMF spokesperson Gerry Rice said Greece was expected to honour its commitments. If Athens does not pay, it would default and IMF Managing Director Christine Lagarde would then “promptly” inform the IMF board of this.
To make the repayment, a possible scenario could be that Greece might receive €1.9 billion in time from profits from Greek securities that the ECB has acquired as part of the SMP programme. Payment of this would not require the prior approval of the national parliaments, according to a source. “But the Bundestag seems to think otherwise”, the source nevertheless sighed. (Elodie Lamer with AN, MB and EH)