Greece, creditors stuck at same red lines

No breakthrough as troika demands tough changes

Greece, creditors stuck at same red lines

International creditors demanded politically sensitive changes to Greek Prime Minister Alexis Tsipras’ tax and reform proposals on Wednesday, adding fresh uncertainty to talks aimed at unlocking aid to avert a debt default next week.

The leftist Tsipras spent all afternoon in a meeting with the heads of the European Commission, the International Monetary Fund, the European Central Bank and euro zone finance ministers, but officials said there was no breakthrough so far.

“They are still stuck at the same red lines,” a euro zone official said after more than four hours of the meeting at EU headquarters, which was continuing. Pension reform remained a central dispute.

The creditors earlier presented counter-proposals intended to bridge an array of differences before euro zone finance ministers were due to convene (10 30 PM IST) to try to approve an agreement.

Prospects of an outcome on Wednesday began to slide, with a Greek government official saying the creditors' demands were not acceptable as they stood, but Tsipras hoped for an agreement later on Wednesday or on Thursday when all 28 EU leaders are due in Brussels for a regular two-day summit.

Before leaving Athens, Tsipras attacked the position of “certain” creditors — a swipe at the IMF — as strange since he said they had rejected fiscal measures Athens put forward to plug a budget gap. “This odd stance seems to indicate that either there is no interest in an agreement or that special interests are being backed,” the premier tweeted.

Financial markets reacted nervously, with investors rushing into safe-haven German bonds and the euro suffering a brief sell-off. European shares dropped and US stocks opened lower.

IMF chief Christine Lagarde spelled out her objections to Greek proposals that focused on higher taxes to plug a big budget gap in an interview released on Wednesday.

“You can’t build a programme just on the promise of improved tax collection, as we have heard for the past five years with very little result,” she told French magazine Challenges. A European Union official insisted the talks had not broken down and said the exchange of proposals was a normal part of the negotiation. But a Greek official said the lenders’ five-page document — full of crossings-out and underlining in red ink — differed little from their initial June 3 offer and took scant account of Athens’ proposals.

In Athens, State Minister Alekos Flabouraris, considered close to Tsipras, told the ruling Syriza party’s political committee the creditors’ revised list of demands was “absurd”, a Syriza official said. The talks are especially fraught because there is so little time left to reach a deal before Greece has to make a repayment to the IMF on June 30, the day its current bailout expires.

If Greece misses that payment and is declared in default to the IMF, it could trigger a bank run, capital controls and an eventual Greek exit from the euro zone, showing that membership of the currency is not irrevocable as its founders intended.

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