Talks falter on Greek debt bailout
LONDON – Greece moved closer to a perilous bankruptcy Saturday after talks over a bailout package broke down with its creditors, who rejected any emergency extension of the aid that has kept the debt-ridden Mediterranean nation afloat.
The other 18 nations that share the euro with Greece said they would not grant a grace period or await the outcome of a snap referendum the Greek government plans to hold next weekend on the bailout proposals on offer from international lenders. Without a deal in hand, Athens is expected to run out of money by Tuesday and default on a payment it owes the International Monetary Fund.
Such a default could throw the Greek economy into chaos, shut down the country’s banks and threaten its membership in the Eurozone. The ill effects could spread to neighboring nations and even the global economy.
European officials blamed Greece’s left-wing government for “unilaterally” breaking off negotiations by announcing early Saturday its surprise intention to conduct a referendum on the creditors’ proposals – and to actively campaign against their approval.
“The process wasn’t finished, as far as we were concerned. The proposals weren’t definitive. They weren’t formally discussed or decided upon,” said Jeroen Dijsselbloem, the leader of the Eurozone’s finance ministers. “That is a sad decision for Greece, because it has closed the door on further talks where the door was still open in my mind.”
But Greek officials accused their creditors of backing them into a corner and refusing to budge on a bailout formula prescribing more of the same austerity that has made the Greek economy contract by 25 percent in the past five years.
Early today, the Greek parliament, led by Prime Minister Alexis Tsipras’ anti-austerity Syriza party, voted to put the creditors’ proposed bailout terms to a referendum July 5.
To cheers from his backbenchers, Tsipras declared that Greece would not be bullied into submission by its European partners and urged his compatriots to vote no in the plebiscite.
The move to hold a referendum took Greece’s negotiating partners by surprise. Analysts said that if it was a ploy to scare them into sweetening the deal, then it backfired spectacularly, with the other Eurozone nations digging in their heels. Instead of talking about new solutions Saturday, Dijsselbloem spoke of insulating the rest of Europe from the fallout of a Greek default.
Some Eurozone officials also said that the referendum would essentially be moot, because Greece’s bailout will have expired by then and the Eurozone’s proposals would no longer be applicable.
Despite the brinkmanship, the Eurozone remains eager to see a deal struck. Although nations such as Germany and France feel they can weather the consequences of a Greek default and its potential exit from the euro, they know that the loss of one of its members would raise serious questions over the stability of the currency.