You are here
Europe markets dip ahead of Greek weekend meeting
EUROPEAN bonds and stocks fell on Friday as nervous investors fretted about the outcome of continued Greek negotiations with its creditors over the weekend. If there is no accord, the fear is default, potential capital controls, leading to an exit from the eurozone.
German chancellor Angela Merkel, whose country is Greece's biggest creditor, urged the Syriza left-wing government to compromise and agree to demands of the "troika" creditors, notably the European Union, European Central Bank, and International Monetary Fund.
"We will not be blackmailed by Greece," Mrs Merkel said, adding that the next meeting of Eurogroup ministers on Saturday would be "of decisive importance" for a Greek solution. If there is no deal over the weekend, Greece, which has already received two bailouts worth 240 billion euros (S$362 billion) since 2010, is set to default on a 1.54 billion-euro IMF payment due on Tuesday.
Greece's international creditors late on Friday offered Athens a five-month, 12 billion-euro extension of its bailout programme on condition that it seals a deal this weekend to avoid an IMF default on June 30.
However, Greek Prime Minister Alexis Tsipras remained defiant, telling journalists that his country would fight for the European principles of democracy, solidarity, equality and mutual respect. "These principles were not based on blackmail and ultimatums," he said.
The ECB disclosed that at the end of May, Greek deposits had fallen to an eleven-year low of 135 billion euros and following anecdotal reports, estimates of withdrawals from banks in June have been an average of 700 million euros a day. The ECB has countered this bank run, which accelerated when Syriza came to power early in the year, with emergency lending estimated at more than 100 billion euros over and above Greece's total debt of 324 billion euros.
Mr Tsipras complained in a diplomatic note that "there is a deep gap between the wishes of the institutions and the Greek people". He has proposed raising new revenues for the state via higher corporate taxes and employers' social security contributions.
The IMF has rejected higher taxes on companies on the grounds that they would reduce much needed growth. The IMF and other creditors want cuts on pensions, an increase in the pensionable age to 67 and increases in sales taxes. EU finance ministers now have two new proposals, one from the Greek government and the other from the creditors. They reconvene on Saturday, hoping to agree on a final financing deal.
Both the Greek and German parliaments must agree to the deal. The Greek parliament must pass "prior actions" legislation on Sunday and Monday before its creditors will unlock a further 7.2 billion euros in loans. German MPs must vote on the troika offer.