Greek drama

Greece talks collapse as time runs out

European Commission says “significant gap” remains between Athens and its creditors despite a weekend of negotiations.

A last-ditch effort to reach a compromise between Greece and its creditors ended in failure Sunday, nudging Athens closer to defaulting at the end of the month.

Representatives of the Greek government, including Minister of State Nikos Pappas, arrived in Brussels on Saturday with a new set of reform proposals from Prime Minister Alexis Tsipras’ government to present to the European Commission. By Sunday, the response was negative, as the Greek delegation left the talks after just 45 minutes, according to EU sources.

“The talks did not succeed as there remains a significant gap between the plans of the Greek authorities and the joint requirements of Commission, ECB and IMF,” said a Commission spokesperson in a statement.

The two sides still disagree on budget savings worth €2 billion, or 0.5 to 1 percentage points of GDP, the spokesperson said. At this point in the talks, the Commission is operating as the central negotiator for Greece’s international creditors, including the International Monetary Fund, which withdrew its technical negotiators in frustration last week.

Representatives from the IMF, the European Stability Mechanism bailout fund and the European Central Bank were waiting Sunday in the commission president’s office, in case the talks progressed. Commission President Jean-Claude Juncker himself was not present, though he was quoted by German news agency DPA as saying that Tsipras “knows the situation is coming to a head.”

The Commission spokesperson said that since the Greek proposals were still “incomplete,” the talks would now have to continue at a meeting of the Eurogroup of finance ministers, who gather Thursday in Luxembourg, along with IMF Managing Director Christine Lagarde. It could be the last chance to approve Greek economic reforms, since any new deal would need approval by some eurozone parliaments, including Germany, within the next two weeks.

On June 30, Greece owes €1.6 billion to the IMF. It’s also when the second bailout program expires.

The Greek government issued a position paper making clear its rejection of any drastic measures such as cuts in state pensions or wages that are anathema to Tsipras’ left-wing party, Syriza.

“The government reiterates, in no uncertain terms,” — and then in bold lettering — “that no reduction in pensions and wages or increases, through VAT, in essential goods — such as electricity — will be accepted,” the statement said. “No recessionary measure that undermines growth — the experiment has lasted long enough.”

Exasperation with the left-wing Greek government’s negotiating tactics has grown across Europe and especially in its biggest economy, Germany, where Vice-Chancellor Sigmar Gabriel wrote in Bild newspaper Sunday: “Not only is time running out, but also patience all across Europe. Everywhere the sentiment is building that — IT’S ENOUGH!”

Wolfang Piccoli, an analyst at Teneo Intelligence, said the continued lack of progress made it increasingly likely that Eurogroup ministers would “issue a take-or-leave deal with an ultimatum attached.” Such an ultimatum would make very few concessions to Athens and would increase the risk of capital controls being imposed, he said.

Eurozone deputy finance ministers who met in Bratislava late last week acknowledged the increasingly unworkable timeline for approving Greek reforms and raised the possibility of a “Plan B” for Greece, including capital controls, in the event of a default at the end of the month.

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