Greece close to EU-IMF deal but creditors must drop 'absurd' demands: PM

[ATHENS] Greek Prime Minister Alexis Tsipras on Friday said the country was close to a default-saving reform deal but called on EU-IMF creditors to withdraw "absurd" demands for further austerity cuts after ducking a loan repayment to the IMF.

"I believe we are now closer than ever to a deal," Mr Tsipras said in a speech to parliament as he faced criticism from the opposition on the state of the negotiations.

But Mr Tsipras insisted that any agreement had to include debt relief in order to be a "definitive" solution to the Greek crisis, and he rejected proposals made by the country's international creditors this week.

"It is clear that the Greek government cannot under any circumstances consent to absurd proposals," the PM said.

Mr Tsipras declined to give a deadline for the talks, stating instead: "There is no time limit... our limit is reaching a deal that is viable and fair." Athens had earlier ramped up pressure in the make-or-break negotiations after postponing a loan repayment due Friday, and securing time to reach a deal compatible with its anti-austerity programme.

Mr Tsipras, 40, is under pressure from hardliners in his Syriza party who are insisting on a firm rebuttal of austerity demands.

He argued that a "cynical" policy of economic asphyxiation and harsh austerity being applied to Greece will ultimately impact other European states in economic difficulty.

"Those who believe that a punishment of Greece will only strike Greece are deeply in the dark," Mr Tsipras said.

"The bell will toll mainly for the countries in southern Europe" that currently benefit from ECB stimulus policies, he said.

"In a year and a half from today, Italy will continue to have a debt of around 130 per cent of output... this also concerns France and Germany itself," Mr Tsipras said.

Athens had been scheduled to repay the International Monetary Fund 300 million euros (S$461.6 million), but announced late Thursday it would bundle all four IMF remittances totalling 1.6 billion euros due this month into a single payment on June 30.

By dodging the threat of an immediate default, Greece has bought more time to negotiate with its creditors - the European Union, IMF and European Central Bank - who are demanding tough reforms before releasing the final 7.2 billion euros in bailout funds.

But the move rattled investors, with the Athens Composite Index closing 4.96 per cent down Friday.

Many worry that a default would set off a chain of events that could lead to a messy Greek exit from the euro.

Mocking Mr Tsipras' negotiating tactics, socialist leader Evangelos Venizelos said Greece's position was essentially to blackmail Europe with the threat of economic suicide.

"We have put the gun to our head, and expect them to help because they fear being spattered with blood," Mr Venizelos said.

Next week Athens will seek to raise nearly 2.3 billion euros in six- and three-month treasury bills.

Mr Tsipras's radical left government is seeking less punitive fiscal and reform requirements attached to loans from creditors, who in turn have expressed dissatisfaction with Greece's ability to fulfil its promises.

The lenders have insisted on higher primary budget surplus targets than Athens would like, financed by increased rates of sales tax, cuts in civil servants' salaries and pensions.

Low targets for the primary surplus - the government budget surplus before payments on national debt - would free up more money for social spending, and the Tsipras government has insisted there will be no further cuts to salaries and pensions.

Another demand for Greece to drop a special sales tax rate for its tourism-vital islands drew a dramatic retort from Mr Tsipras' flamboyant coalition partner, the nationalist Panos Kammenos.

"VAT on the islands will not change so long as I exist," Mr Kammenos, who is defence minister, wrote in a tweet.

Though Mr Tsipras spoke by phone again late Thursday with German Chancellor Angela Merkel and French President Francois Hollande, the EU said no date had been set for another round of negotiations after talks late Wednesday failed to produce a breakthrough.

Mr Tsipras also phoned Russian President Vladimir Putin to discuss business and energy cooperation, a government source said.

Several European sources told AFP earlier that a new meeting is not expected to take place before Tuesday, after the G7 summit.

The crisis talks between Athens and its creditors will be a key topic for G7 leaders when they meet in Germany.

They are pushing for a compromise deal, but the Athens government feels it has already considerably softened its initial position.

Only Zambia has previously used the bundling payment option during its debt crisis in the mid-1980s.

AFP