Greece Challenges Creditors With New Proposal to Break Debt Impasse

By LIZ ALDERMANJUNE 2, 2015

The New York Times

ATHENS — Greece elevated the game of brinkmanship with its international lenders on Tuesday, as Prime Minister Alexis Tsipras announced that his government had sent creditors a new proposal, on Greece’s own terms, to unlock financial aid that the struggling nation desperately needs.

But the creditors — the European Commission, the International Monetary Fund and the European Central Bank — were moving on Tuesday toward completing their own proposal to break the monthslong impasse with Athens. That move came after European leaders, including Chancellor Angela Merkel of Germany, held an emergency session in Berlin on Monday night to come up with a blueprint.

No details of either plan were publicly revealed on Tuesday. But the decision by Athens to submit its own last-minute proposal, even as its creditors were finalizing the details of theirs, raised questions about whether the two sides would be able to quickly strike a deal, and if so, how much money would be forthcoming.

Creditors had said late Monday that their offer would effectively amount to a “take it or leave it” deal.

Jeroen Dijsselbloem, the head of the Eurogroup of eurozone finance ministers, said on Tuesday that Greece was unlikely to get any cash quickly, even if a deal was struck soon. In an interview with the Dutch broadcaster RTL, he said it was “not even theoretically possible” for lenders to send Greece additional financial support while negotiations were continuing.

“There is some progress, but it’s really not enough,” Mr. Dijsselbloem said on Dutch television. “We’re still nowhere far enough, that’s the conclusion and time is pressing.”

Ms. Merkel has an extra incentive to push for a breakthrough this week. She will play host to a summit meeting with President Obama and other leaders of the Group of 7 countries on Sunday and Monday in southern Bavaria. At a G-7 meeting of finance ministers last week in Dresden, the United States Treasury secretary, Jacob J. Lew, urged European leaders to quickly find a solution to the crisis, warning that a failure to do so would “create immediate hardship for Greece and broad uncertainties for Europe and the global economy.”

Greece needs more money soon if it is to repay the creditors billions of euros in loan obligations that will come due in the coming days and weeks. It will otherwise risk a messy default that could lead it to leave the eurozone.

“We have submitted a realistic plan for an agreement,” Mr. Tsipras said on Twitter on Tuesday. “It is now up to the political leadership of Europe to decide.” The prime minister is headed to Brussels on Wednesday to discuss the Greek proposal with Jean-Claude Juncker, the president of the European Commission, according to a Greek government official.

The European Commission would not comment on Mr. Tsipras’s plan.

“But the fact that documents are being exchanged is already a good sign,” Annika Breidthardt, a spokeswoman for the European Commission, said on Tuesday at a daily briefing in Brussels.

A person with knowledge of the creditors’ talks, who was not authorized to speak publicly, said on Tuesday that the creditors had more or less reached an agreement on an offer to Greece, but still had to work out some technical details.

But a Greek government official, who spoke only on the condition of anonymity in keeping with the government’s policy, said on Tuesday that Mr. Tsipras “hasn’t received any draft agreement from the institutions, nor has there been any communication between the prime minister or any other government official with corresponding representatives of the institutions.”

The two sides have been haggling for months over the terms and conditions that Greece must accept in order to get additional funds from an international bailout totaling 240 billion euros, or about $260 billion.

The impasse, and the prospect that any new proposal by the creditors would be in effect an ultimatum, puts Mr. Tspiras in a delicate position with his leftist Syriza party. Some members of the party have said that Greece should reject any deal that required further austerity measures, like additional reductions in pensions or higher consumption taxes.

Greece’s deputy prime minister, Yannis Dragasakis, said on Tuesday that while Athens wanted an agreement, the country would not bow to “blackmail” or enforce new painful austerity measures.

In a further sign of trouble for Mr. Tsipras, the labor minister, Panos Skourletis, raised the prospect of holding elections or a referendum on the matter, saying that if the agreement reached with creditors was not “honorable,” the Greek people “must be asked before we sign.”

While the terms that would be offered to Greece were not being disclosed on Tuesday, eurozone leaders were expected to remain firm on several points that might be difficult for the Greek government to accept.

For example, the creditors will insist that Greece back away from election promises to undo cuts in pension benefits. As part of the previous bailout terms, the creditors had forced Greece to cut the retirement benefits, which were considered too generous in relation to the Greek economy.

The pension benefits also have political significance. Some of Greece’s creditors view them, even with the cuts, as being more generous than benefits in some other eurozone countries, like Latvia, which are being asked to contribute to a Greek bailout and might refuse to help finance a standard of living that is better than their own.

The eurozone creditors may be able to offer Greece easier terms on government spending, by reducing the size of the so-called primary surplus that Greece is required to achieve. A primary surplus means that government revenue exceeds spending, before the cost of servicing the government debt.

But even if they are willing to reduce the primary surplus requirement, the creditors are not likely to tolerate a primary deficit in Greece — a negative financial position that would add to the country’s already crushing debt burden. The Greek economy has lost ground this year, partly as a result of the uncertainties of the bailout negotiations, and the country may have already slid back into a primary deficit.

The creditors are pressing ahead in the belief that negotiations have gone too slowly since all sides struck a deal on Feb. 20 to extend Greece’s current bailout program until June 30, according to an official with knowledge of the discussions, who was not authorized to speak publicly.

An agreement is needed very soon, probably this week, this official said, so that national parliaments in Germany and elsewhere can sign off on the deal before the Greek bailout program runs out.