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Greece

Greek PM says cannot accept “absurd” proposal from lenders (update 2)

Greek PM Alexis Tsipras delivers a speech during a parliamentary session to brief lawmakers over the ongoing talks with the country's lenders, in Athens

By Renee Maltezou and Karolina Tagaris

Athens delayed a 300 million euro payment to the International Monetary Fund on Friday and Prime Minister Alexis Tsipras spurned an “absurd” proposal from lenders in the impasse that threatens to push Greece into bankruptcy and out of the euro.

In a speech aimed at winning parliament’s backing for his rejection of the terms, Tsipras balanced indignation with expressions of confidence that a more favourable deal would be found that could keep Greece inside the currency bloc.

Opinion polls published on Friday show around three out of four Greeks want to remain in the euro zone. More want their government to accept the offer from European and International Monetary Fund creditors than want them rejected. But Tsipras, elected on promises to end austerity, was defiant.

“The Greek government cannot consent to absurd proposals,” Tsipras told parliament. “I want to believe that this proposal was a bad moment for Europe or at the very least a bad negotiating trick and will soon be withdrawn by the masterminds themselves.”

The deal tabled by lenders crossed many of his government’s “red lines”, including tax hikes, privatisations and a cut to benefits for poor pensioners.

Greece sent its own 47-page compromise proposal to lenders this week, calling for low primary surplus targets and a reversal of labour and pension reforms enacted at the behest of international lenders in recent years.

Tsipras said that remained the only “realistic” proposal on the table. He said he was confident that “a deal was closer than ever before” since the Greek proposal took the needs of lenders into account, but time was running out for both sides.

Greece’s bailout expires at the end of June and if no cash-for-reforms deal is done by then, default would seem certain, shunting the euro zone into uncharted waters and opening the way for Greece to exit the single currency.

The prime minister was speaking after Athens delayed a 300 million euro payment due to the IMF – a highly unusual step that rattled financial markets, but one that does not yet signal a formal default.

European stocks fell and Greek bond yields shot higher as investors worried that four months of bitter negotiations between Greece and its international creditors might yet end in failure.

Tsipras said he was shocked that after five year of austerity the lenders would make demands like abolishing a small benefit for low-income pensioners and imposing a 10 percentage point rise in electricity tax.

His leftist government says overly harsh austerity policies imposed by lenders in bailout packages have deepened one of the worst depressions in modern times.

Earlier on Friday a Greek deputy minister said Athens may call fresh elections as the only way to break the impasse and secure public legitimacy for the difficult decisions needed to secure more cash.

In what appeared to be a threat that Greece was prepared to move unilaterally if its demands were not met, Tsipras said the government would legislate the restoration of collective bargaining rights for Greek workers – a move opposed by lenders.

On Friday the government decided to bundle together some 1.6 billion euros it is scheduled to pay the International Monetary Fund in June into a single payment at the end of the month, skipping a 300 million euro payment due on Friday.

It was the first time in five years of crisis that Greece has postponed a repayment on its 240 billion euro bailouts from euro zone governments, the European Central Bank and the International Monetary Fund.

The IMF said the manoeuvre was unorthodox, but permissible.

Deputy Social Security Minister Dimitris Stratoulis, close to the far-left of the ruling Syriza party, made clear the decision was a negotiating tactic.

“The government’s move is a message that it wants to wait and see how far they (lenders) will take it, if they will back off from this unreasonable, inhumane, colonialist package they are proposing,” he said.

Yields on Greek two-year bonds soared nearly three percentage points to over 25 percent, and lower-rated euro zone bonds also headed higher in a sign of growing market unease.

Many analysts expect a last minute aid deal that would avert a Greek exit from the euro but say the coming weeks could see further ructions in Greek politics, keeping markets on edge.

“Fasten your seat belts for what could be a rough ride in Greece,” said Berenberg Bank chief economist Holger Schmieding.

Time is running out to clinch a deal and get further disbursements approved by EU national parliaments, some of which have appeared reluctant to offer Greece much budget slack, before the bailout programme expires.

With Europe’s big powers, and the United States, concerned about the unpredictable outcome as Greek reserves shrink toward zero, sources said the creditors had showed some flexibility this week by lowering the budget surplus that Athens will be required to run before debt service payments.

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