In Depth

Greece finally reaches deal to release €12bn bailout funds

ECB stress tests show country's banks needs €14bn to fill a capital shortfall

Grexit: Tsipras remains defiant as endgame looms

16 June

Greece is teetering on the brink of bankruptcy, as Prime Minister Alexis Tsipras refuses to agree to a deal with international creditors.  Eurozone officials are considering convening an emergency summit amid concerns that progress will not be made at a last-minute meeting between finance ministers scheduled for Thursday, the Financial Times reports. This comes after the latest round of talks aimed at securing €7.2 billion (£5.2 billion) in desperately needed bailout funds collapsed after less than an hour of negotiations. Greece has until the end of June to repay €1.6bn (£1.2bn) to the international Monetary Fund or risk an exit from the eurozone – or Grexit. Creditors have demanded that Athens make a range of controversial economic reforms, including yet more public sector cuts, a slimmer civil service, fewer tax rebates and more private sector investment – terms the ruling Syriza party finds unacceptable. Tsipras appears to have ruled out any of the proposed concessions, saying he will not be presenting any new proposals at the finance meeting. He accused the eurozone and the International Monetary Fund of having "political motives" and "pillaging" Greece with its demands. "We will wait patiently till the institutions adhere to realism," he said. With a Grexit looming large, Germany's European Commissioner warned that the country risks collapsing into a "state of emergency" unless it agrees to a deal. Günther Oettinger said the EU must urgently develop contingency plans to cope with social unrest and a lack of energy and medical supplies in the country.

The latest developments have caused European stocks to slide and Greek government interest rates to soar, with Spanish and Italian bond yields rising out of fears of a possible contagion, the Daily Telegraph reports.  "[We think] the Greek saga is finally reaching its climax," said Hans Redeker from the investment company Morgan Stanley.

Greece misses debt repayment deadline amid worsening crisis

5 June

Greece is to delay repayment of €300m (£219m) worth of debt to its international creditors, moving itself ever closer to a eurozone exit.

The payment to the International Monetary Fund had been due today, but Athens instead announced that it was taking advantage of what The Guardian calls a "little-known loophole" in the regulations to bundle all of this month's repayments into a lump sum worth €1.5bn.

The deadline for that repayment is the end of June, the same day Greece's bailout deal with the EU and the IMF expires. Senior officials within the IMF believe that the delay in repayment is a "political decision rather than a financial one", the Financial Times reports, and it ups the ante in debt negotiations as the deadline approaches.

The decision comes less than 24 hours after Prime Minister Alexis Tsipras was presented with a new proposal to solve Greece's debt crisis. International creditors offered Greece access to €7.2bn in much-needed bailout aid in exchange for difficult economic reforms. 

These include public sector cuts, a slimmer civil service, fewer tax rebates and more private sector investment, terms many within the ruling Syriza party are unwilling to accept.

But unless a deal is reached by the end of the month, Greece risks defaulting on its debt and leaving the eurozone. Speaking to the BBC, German chancellor Angela Merkel put pressure on Tsipras to accept the deal.

"We want Greece to stay in the euro but in order to achieve that, Greece has to make the necessary efforts, and these are the subject of our ongoing discussions, and I want to see them come to a positive result," she said. 

As both sides continue to try and reach a deal, commentators suggest the decision to delay repayment is a calculated negotiating tactic on Greece's behalf.

The last-minute decision "smacked of both desperation and defiance," says The Guardian's Heather Stewart. "Greece's stance is likely to infuriate the IMF, which doesn't want to shoulder the blame for pushing Greece into default, but reportedly believes current plans for tackling its debt burden remain unrealistic."

Greek debt crisis: creditors to offer Athens last-minute deal

03 June

Greek prime minister Alexi Tsipras is set to meet his country's international creditors in Brussels today, with the deadline for Greece's next debt repayment looming large. 

He will be presented with a new plan to solve Greece's debt crisis, agreed upon by the International Monetary Fund, the European Commission and the European Central Bank following a last-minute deal secured during emergency talks last night.

Athens is due to repay €300m to the International Monetary Fund at the end of the week, as well as an additional €1.3bn by the end of June. Once again, a failure to reach a deal could spark a Greek default and a potential exit from the eurozone. 

The exact terms of the creditors' offer have not yet been released, but are expected to include a demand for difficult economic reforms in return for access to €7.2bn in desperately needed aid, the Financial Times reports.

Tsipras, however, has his own proposal and said he was heading to Brussels to encourage Europe’s leaders to "see reason". His decision suggests "he's not prepared to accept the creditors' new proposals without a fight", says The Guardian.

His 47-page plan is said to include "difficult concessions" from Greece, but Jeroen Dijsselbloem, the Dutch chairman of eurozone finance ministers, warned it didn't go far enough.

There now appears to be little room for manoeuvre and "patience is wearing thin after months of acrimonious negotiations", says the BBC's Chris Morris.

But, as the Financial Times points out, even if Greece does accept the deal it would only be a temporary fix. "[The plan] would only solve its financing troubles until the end of the month, when its current bailout expires," it warns.

'Grexit' looms large as Athens warns of liquidity crisis

17 April

The danger of a 'Grexit' is mounting as the Greek finance minister admits his country is desperately short of funds, reports the Daily Telegraph.

Accusing Europe's creditor powers of trying to force his country to its knees through "liquidity asphyxiation", Yanis Varoufakis confessed to a gathering in Washington: "Liquidity is drying up in Greece."

He accused a conspiracy of forces of trying to "snuff out" the Syriza government, and warned that this could have devastating effects on the entire bloc. "Toying with Grexit, or amputating Greece, is profoundly anti-European," he said. “Anybody who says they know what will happen if Greece is pushed out of the euro is deluded."

Continuing with the medical metaphor, Varoufakis – recently described as “the most badass finance minister" by Business Insider - said the European Central Bank and the EMU authorities were deliberately tightening the pressure on Athens until its arm was "gangrenous".

His warnings were echoed by head of the Boston Federal Reserve, Eric Rosengren. "I would say to some European analysts who assume that a Greek exit would not be a problem, people thought that Lehman wouldn't be a problem. If you measured the size of Lehman relative to the size of the US economy it was quite small," he told a group at Chatham House.

Meanwhile, German finance minister Wolfgang Schaeuble believes Greece would struggle to find credit beyond the EU and IMF. He said Athens would be welcome to try to secure investment from Beijing or Moscow, but would face difficulties.

Greece bailout: what they must agree by tonight

23 February

Greece secured a last-minute reprieve on Friday following crunch negotiations with Eurogroup financial ministers, but the stay of execution will only last until tonight.

The Syriza government now has to submit its preliminary list of reform measures that will form the basis of further negotiations up until the end of April, as Greece tries to find a new financial settlement.

That preliminary list will need to be composed carefully, the BBC says, because if the Eurogroup decides to reject it "in theory all bets would be off – and we would be back to wondering whether Greece is in or out of the euro".

Tsipras is treading a very fine line between the demands of Greece's international creditors and the expectations of the Greek voters who brought him to office. Despite his party's attempts to pass Friday's negotiations off as a success, Syriza "came under attack for selling 'illusions' to voters", Reuters notes, by not taking steps towards extracting the country from its international bailout programme.

"Ultimately Greece has to carry out reforms but it is uncertain given that the government has won by promising not to reform," said Hiroki Shimazu, senior market economist at SMBC Nikko Securities.

Here is how things stand for Greece as Monday night's deadline looms:

What has been agreed?
  • Greece's creditors agreed to give finance minister Yanis Varoufakis and prime minister Alexis Tsipras until tonight to come up with a list of proposed structural reforms.
  • Once submitted, these reforms will be scrutinised by the troika (now renamed "the institutions") of the European Central Bank, the European Union and the International Monetary Fund.
  • The 19 eurozone finance ministers will then discuss the reform proposals in a telephone conference – possibly late tonight or tomorrow.
  • If successful, Greece will be extended a four-month lifeline, buying time for further negotiations on its vast debts, which currently stand at 175 per cent of its economic output.
What remains to be decided?
  • The main aspect of the negotiations that remains unknown is the extent to which Syriza intends to meet its creditors' demands. Aside from the budget cuts and economic changes, the reform list could include measures such as social security reforms, deregulation of the economy and privatisation.
  • Friday’s agreement also included a Greek commitment towards "implementing long overdue reforms to tackle corruption and tax evasion, and improving the efficiency of the public sector" Athens University economist Aristide Hatzis told The Guardian. But quite what form those reforms will take has yet to be resolved.
  • The preliminary list will form the basis of ongoing discussions for the next two months, with a final list of reforms due by the end of April.

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