You are here

Greece hopeful of last-ditch deal despite default warnings

Saturday, June 20, 2015 - 07:32
bank200615.jpg
Greece said on Friday it is still hopeful for an 11th-hour deal with its creditors before it defaults on its debt, as the ECB threw Greek banks another lifeline and depositors withdraw their savings.

[ATHENS] Greece said on Friday it is still hopeful for an 11th-hour deal with its creditors before it defaults on its debt, as the ECB threw Greek banks another lifeline and depositors withdraw their savings.

"Those who invest in crisis and terror scenarios will be proven wrong," Prime Minister Alexis Tsipras's office said, amid reports that Greeks banks were facing an increase in withdrawals.

While new emergency European meetings have been called to break the deadlock in talks to unlock bailout funds, the brinkmanship between Athens and its creditors has pushed Greece close to a default that could lead to a messy euro and EU exit.

Dire headlines have apparently led many Greeks to withdraw more money from banks, which they have been doing gradually for months.

A billion euros were withdrawn from Greek banks on Thursday, following another 1.6 billion euros (S$2.42 billion) over the two previous days, financial website Euro2day reported.

The Bank of Greece insisted the country's banking system was stable, but sources said it appealed to the European Central Bank (ECB), which increased the emergency liquidity level available to Greek banks by an unspecified amount at an emergency meeting on Friday.

According to state agency ANA, the funding cap was raised by 3.3 billion euros.

EU President Donald Tusk has called an emergency summit of the leaders of the 19 eurozone countries in Brussels on Monday after finance ministers failed Thursday to break the five-month deadlock between the anti-austerity government in Athens and its international creditors.

French President Francois Hollande insisted Friday that "everything" must be done to seal a compromise on the Greek debt crisis.

We must "do everything to relaunch negotiations, so the talks can achieve a compromise, but one in line with European rules," said Mr Hollande, following talks in Bratislava with his Slovak counterpart.

Economic powers outside the eurozone were also watching the situation with growing alarm, with the United States saying there is "an urgent need for both Greece and its international partners to take steps towards compromise".

MONDAY SUMMIT 'CRUCIAL'

Mr Hollande said Monday's emergency eurozone summit would be "crucial." "I don't want us to meet only to come to the conclusion that we have failed," he said.

However, in a move that seemed calculated to irk other European leaders amid tensions with Russia over Ukraine, Mr Tsipras visited Saint Petersburg as the star guest at President Vladimir Putin's investment drive forum.

The two leaders did not discuss potential Russian financial aid to cash-strapped Greece, a Kremlin spokesman said, nevertheless the two sides sealed a preliminary agreement to set up a joint venture to extend the TurkStream gas pipeline through Greece.

The two countries will jointly own the venture, with Russia expected to foot the bill as Greece hopes the project will somehow translate into an upfront payment.

BAFFLING TSIPRAS

Expressing the general mood towards Mr Tsipras's diplomacy, European Commission chief Jean-Claude Juncker has admitted to being baffled.

"I don't understand Tsipras," Mr Juncker told German weekly Der Spiegel in an article to be published Saturday.

Greece has little time left to agree a reform deal in order to secure the remaining portion of its multi-billion-euro bailout, which it needs to avoid defaulting on a debt payment of around 1.5 billion euros to the International Monetary Fund due on June 30.

Analysts have long warned that a default may set off a chain of events leading to a "Grexit" - Greece leaving the eurozone, and even the Bank of Greece warned that would be the likely result.

"I repeatedly warned Mr Tsipras that he cannot rely on me to prevent a collapse of talks," Mr Tusk said.

"We are close to the point where the Greek government will have to choose between accepting what I believe is a good offer of continued support or to head towards default," he said in a video message Friday.

Mr Tsipras, who was elected on an anti-austerity promise in January and who has been reluctant to accept a deal that would raise taxes and cut spending further, warned in turn that a Greece's exit would lead to the undoing of the euro.

"The famous Grexit cannot be an option either for the Greeks or the European Union. This would be an irreversible step, it would be the beginning of the end of the eurozone," Mr Tspiras told the Austrian daily Kurier on Friday.

Mr Tsipras's own office was more conciliatory, adding in Friday's statement: "We hope that the final negotiations take place at Europe's highest political level and we are working toward the success of this summit."

Creditors have refused to pay the remaining 7.2 billion euros if there is no deal, and the cash will be lost forever to Greece if there is no agreement for an extension.

Greece must pay another 6.7 billion euros to the ECB in July and August. There have been reports of that plans to enact capital controls if Athens' financial system runs dry.

The Athens stock exchange ended the day up 0.57 per cent after falling sharply earlier in the week.

AFP