Greece crisis deepens amid deadlock

A man passes by a graffiti showing a euro sign and a car in the colours of Greece jumping off on the wall of an old house in Athens, Greece, on 24 June 2015

If Greece does default, it could exit the eurozone

Greece and its international creditors remain in deadlock over its debt crisis despite a series of top-level meetings.

Prime Minister Alexis Tsipras failed to reach a deal with Greece’s lenders, then a meeting of European finance ministers broke up without progress.

The Athens government faces default if it fails to make a €1.6bn (£1.1bn) IMF debt repayment by Tuesday.

As EU leaders met in Brussels, Germany’s Angela Merkel warned that talks were going nowhere.

“We still haven’t made the necessary progress; in some places it looks like we’re even going backwards,” she told reporters.

If Greece does default, it could exit the eurozone, with possible repercussions for the rest of Europe and the world economy.

Only once agreement is reached will the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF) unlock the final €7.2bn tranche of bailout funds for cash-strapped Greece.

The impasse threatens to overshadow an EU summit opening on Thursday, where leaders will also discuss the European migrant crisis and UK PM David Cameron’s renegotiation aims.

Latest updates: Business live

The relationship between Alexis Tsipras, Italian PM Matteo Renzi and Germany’s Angela Merkel appeared jovial at the EU summit despite the deadlock

Greece’s Finance Minister Yanis Varoufakis attended the Eurogroup meeting to put forward Athens’ own ideas

After the meeting of finance ministers broke up without agreement, Eurogroup head Jeroen Dijsselbloem said it was not too late for Greece to accept the proposals of its international lenders.

It was the fourth time that the finance ministers had met in a week in an attempt to prevent a Greek debt default. They will meet again on Saturday.

An EU diplomat told the BBC that the Eurogroup had to make a decision then – yes or no.

The Greek government has criticised the international creditors for rejecting its own ideas, which were initially welcomed.

IMF head Christine Lagarde said the lenders had been presented with a counter-proposal by the Greek parties “at the last hour” on Thursday and needed more time to assess it, according to Reuters.

The IMF has been particularly strong in refusing to accept Greece’s proposals put forward earlier this week.

Correspondents say the Greek plan included far more tax rises and far fewer spending cuts than creditors had suggested.

Why the IMF is worried – by Andrew Walker, BBC economics correspondent

Throughout the Greek crisis, the IMF has been concerned that the programme should add up. That means that specific actions should be able to achieve whatever targets are agreed for the Greek government’s borrowing needs.

In the current impasse, one concern is that the Greek proposals include too much emphasis on tax rather than spending.

The IMF worry is that might aggravate the economy’s weakness. For the long term the IMF’s concern is that Greece should ultimately have a sustainable debt burden and has been telling the eurozone that it should be thinking about debt relief.

Like the other players in this crisis, the IMF has politics to contend with: IMF member countries (Brazil has been a notable example) who have in the past been unhappy about the organisation’s financial support for Greece.

Greece’s PM Tsipras held talks on Thursday morning with IMF leader Christine Lagarde and European Central Bank head Mario Draghi as well as Jean-Claude Juncker, the president of the European Commission, and Eurogroup leader Mr Dijsselbloem.

Technical experts met several hours earlier to continue deliberations. However, no deal was struck.

If an agreement is reached, it will have to be endorsed by Greece’s parliament, with some critics at home accusing the prime minister of reneging on his party’s campaign pledge to end austerity.

Greek debt talks – main sticking points

  • Greece has refused to accept cuts to pension payments or public sector wages
  • The IMF is pushing for deeper spending cuts, not just more tax rises
  • A key point of friction is a special benefit paid to some low-income pensioners, which creditors want scrapped
  • Creditors also want a wider VAT base; Greece says it will not allow extra VAT on medicines or electricity bills, and has also resisted calls for VAT hikes on hotels and restaurants
  • Athens wants a concrete commitment to debt relief, something its creditors are not offering

Can Greece stay in the euro?

Chris Morris: Tsipras may face impossible choice

How did Greece get in this mess?

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