Greece Stares Into Unknown as Tsipras Insists a Deal Can Be Done

by Corina RuheStephanie BodoniNikos Chrysoloras

June 19, 2015 — 11:32 AM EEST Updated on June 19, 2015 — 1:40 PM EEST

Bloomberg

Greek Prime Minister Alexis Tsipras insisted a deal to avert a default can be reached at an emergency summit of European leaders on Monday as his country clings to the euro after almost five months of brinkmanship.

Markets swayed as investors parsed each new twist for signs of a possible accord. Banks stocks reversed gains and led the Athens Stock Exchange lower on Friday as the European Central Bank prepared to discuss whether to maintain a lifeline at an emergency session. Greece’s existing bailout agreement expires on June 30, the day it’s due to make a payment to the International Monetary Fund.

“We aimed that final negotiations take place at the highest political level in Europe, and we are now working for the success of this summit,” Tsipras said in a statement. “Those who bank on crisis and terror scenarios will be proven wrong.”

While discussions, deadlines and apparent denouements have come and gone before, the wrangling over a deal to keep Greece afloat is at the sharp end. Thousands of people assembled outside the Greek Parliament in Athens last night asking for the nation to be saved after the government blamed a conspiracy to blackmail Greece for the frustration in Luxembourg.

As the ASE stock index rose as much as 1.1 percent before falling 0.2 percent, the yield on Greece’s two-year bonds declined 10 basis points to 28.56 percent.

Adult Talk

“Tsipras issued a dovish statement this morning, indicating that he will blink and come to an agreement,” said Miranda Xafa, a former Greek representative to the IMF who now runs a consultancy in Athens. “The Greek premier overplayed his hand, believing that Greece is systemic and therefore creditors would accept his demands for fear of contagion.”

With the specter of capital controls looming, key players deciding Greece’s fate voiced their exasperation with Greece’s top negotiators while the silence of others, such as German Finance Minister Wolfgang Schaeuble, also spoke volumes.

“The key emergency is to secure a dialog with adults in the room,” IMF Managing Director Christine Lagarde said after listening to Greek Finance Minister Yanis Varoufakis expound in Luxembourg on Thursday. “What we lack is a dialog.”

Bank Deposits

Varoufakis this morning said that “regrettably, no discussion of our proposal took place within the Eurogroup.”

“Even more regrettably, instead of that essential discussion, we observed pernicious ‘leaks’ to the press regarding Greece’s banking system,” he said.

Greece and its creditors -- the ECB, the IMF, and the European Commission -- seemed further apart than ever after four hours of closed-door talks. Without a settlement, the ties still binding Greece to the currency bloc may begin to unravel with funding keeping Greek banks afloat under scrutiny. In central Athens, television cameras swarmed around banks, though business wasn’t any brisker than usual.

Increasingly isolated among his European peers, Tsipras was in St. Petersburg to meet Russian President Vladimir Putin this week. Greek and Russian officials discussed a preliminary agreement to extend OAO Gazprom’s Turkish Stream pipeline to bring Russian natural gas to southeastern Europe.

12 Days Left

While Greece still has 12 days left before the bailout window shuts, the need for some parliaments to sign off on any agreement means it’s already too late for them to access aid in time to pay the IMF about 1.5 billion euros ($1.7 billion) at the end of the month, according to Jeroen Dijsselbloem, who leads the group of European finance ministers.

“Let’s say that we do reach an agreement; it’s unthinkable that the implementation and then disbursement will also have to take place before the end of the month,” Dijsselbloem said. “That is simply impossible.”

To get at least some money, Greece will now look to extract an extension of its bailout agreement at a June 22 summit that will put Tsipras and Germany’s Angela Merkel, who has tried to smooth out tensions, in the same room. That EU meeting will start at 7 p.m. in Brussels.

The problem is, as the Maltese Finance Minister Edward Scicluna put it, that nobody “wants to pull the plug.”