Greece Talks End After 45 Minutes as Focus Shifts to Eurogroup

by Jonathan StearnsMarcus Bensasson

June 14, 2015 — 8:15 PM EEST Updated on June 14, 2015 — 10:02 PM EEST

Bloomberg

Last-ditch negotiations in Brussels between Greece and its creditors collapsed after just 45 minutes on Sunday.

The latest failure to find a formula to unlock as much as 7.2 billion euros ($8.1 billion) in aid for the anti-austerity Greek government of Prime Minister Alexis Tsipras comes amid growing warnings about the risk of Greece’s exit from the 19-nation euro.

The focus now shifts to a June 18 meeting in Luxembourg of euro-area finance ministers, known collectively as the Eurogroup. That meeting may become a make-or-break session and be preceded by a flurry of high-level consultations from Berlin to Washington.

“While some progress was made, the talks did not succeed as there remains a significant gap,” the European Commission said in a text message on Sunday evening. “On this basis, further discussion will now have to take place in the Eurogroup.”

More than four months after he was swept into office on a wave of public discontent about budget cuts that deepened a six-year Greek recession, Tsipras has refused to meet the demands of the euro area and the International Monetary Fund on pension cuts, tax rises and targets for a budget surplus before interest payments, known as a primary surplus.

He had sent a delegation to Brussels with proposals to narrow the differences. The commission, the European Union’s executive arm, said the talks were President Jean-Claude Juncker’s “last attempt” to reach a compromise.

‘Remain Incomplete’

“The Greek proposals remain incomplete,” the commission said after the weekend talks ended. The gap between the parties on fiscal measures needed is “in the order” of 2 billion euros annually, according to the commission.

The Greek government blamed the euro area and the IMF, which together finance Greece’s 240 billion-euro rescue program first drawn up in 2010, for sticking with demands that it says are economically senseless and politically unacceptable.

Greece’s creditors insisted that the difference between the two sides on the size of the primary surplus needed to be covered entirely by pension cuts and increases in value-added tax, Greek Deputy Prime Minister Yannis Dragasakis said in an e-mailed statement on Sunday. He was among the Greek delegation members in Brussels for talks that began on Saturday afternoon and ended with the failed meeting on Sunday.

As those deliberations were taking place, Germany gave its most explicit warning yet that Greece could eventually leave the euro.

Greek Euro Exit

“The shadow of a Greek exit from the euro zone is becoming increasingly perceptible,” German Economy Minister and Vice-Chancellor Sigmar Gabriel wrote in a Bild newspaper opinion column to be published on Monday. “Greece’s game theorists are gambling the future of their country. And Europe’s too.”

Wolfango Piccoli, managing director at Teneo Intelligence in London, said the persistent stalemate in the Greek-aid negotiations increases the likelihood both of a final offer to Greece from its creditors and of capital controls in the country, where bank deposits have been shrinking for months amid uncertainty about whether Greece can keep paying its bills.

“The continued lack of progress increases the likelihood that at its Luxembourg meeting on 18 June, the Eurogroup may issue a take-or-leave deal with an ultimatum attached,” Piccoli said in research note on Sunday. “In contrast to a negotiated agreement, this would likely entail only very few concessions to Athens. This scenario, in turn, decreases the probability of Tsipras being able to accept the offer, while raising the risk of capital controls.”