Greece Talks Deadlocked as Euro Hardliners Resist New Bailout

European finance aides worked through the night struggling to overcome a deadlock over how to keep Greece in the euro after an impasse among their bosses forced a second day of emergency talks.

A hardline group led by Germany resisted the appeal, threatening to delay the infusion Greek Prime Minister Alexis Tsipras desperately needs as Greece runs low on cash and its banks head into a third week of being shut. The issues involve dealing with its growing debt and the credibility of reforms that some ministers said rely too heavily on taxes.

“There are many differences between the Eurogroup and Greece,” Austrian Finance Minister Hans Joerg Schelling said as he arrived on Sunday. “We have very difficult discussions ahead.”

The standoff in Brussels came hours after Tsipras won overwhelming support in the Greek Parliament for a package of spending cuts, pension savings and tax increases intended to win financial aid of at least 74 billion euros ($83 billion). Among its shortcomings, the proposals failed to reflect the economic deterioration since talks collapsed and capital controls were imposed two weeks ago, according to Dutch Finance Minister Jeroen Dijsselbloem, the head of the Eurogroup.

Common Ground

Greece and its creditors are struggling for common ground after Tsipras missed a payment to the International Monetary Fund June 30 and allowed its second rescue package to lapse the same day. A new bailout will be Greece’s third in five years.

Dijsselbloem adjourned last night’s talks as tempers flared, according to the Athens News Agency. At one point, Germany’s Wolfgang Schaeuble snapped, “Don’t take me for a fool.”

“I don’t believe that we are at this point authorizing any kind of additional loan to Greece,” Finland’s Alexander Stubb said. “About half of members had the same stance as us and maybe a few had another view.”

The five-month standoff between the former communist student leader, whose party translates to Coalition of the Radical Left, and his creditors deepened the country’s economic misery. Bank withdrawals are limited to 60 euros a day, pensions have been rationed and commerce is grinding to a halt.

Economic Abyss

“The Greek economy is moving closer to the abyss,” Slovakia’s Peter Kazimir said before the meeting began.

While Greek government bonds rallied on Friday on optimism Tsipras’s package would lead to a deal, debt issued by its four largest banks remained below 40 cents on the euro, according to data complied by Bloomberg.

The prices suggest investors expect banks to restructure debt after the country’s economic crisis spurred depositors to withdraw about 40 billion euros between December and June.

The finance chiefs also rebuffed any talk of debt relief, a step that the IMF has backed.

The country’s three creditor institutions -- the IMF, the European Commission and the European Central Bank -- earlier assessed the program positively as a basis for the bailout, according to a euro-area official who spoke on condition of anonymity.

Moscovici’s Hope

It may be up to Europe’s political leaders to break the gridlock. They’re scheduled to convene Sunday in Brussels starting at about 4 p.m.

The creditors still view the country’s reform proposals as insufficient to meet fiscal targets, Frankfurter Allgemeine Sonntagszeitung said, citing an assessment paper provided to euro-area finance ministers.

Tsipras faces political antagonists not just in Berlin and Brussels but within his own party. More than a dozen Syriza members refused to back the plan, with some of them denouncing the harsh measures it prescribes less than a week after Tsipras won an anti-austerity referendum. The prime minister said after the vote that his priority would be to complete negotiations with the creditors on a bailout deal.

“It could have been better,” Spain’s Luis de Guindos said as he left Saturday’s talks. “But it could have been worse.”

Source : Bloomberg

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