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Greece Teeters On Brink: EC Makes Last-ditch Offer To Avoid Greek Default

GREEKMr Jean-Claude Juncker, President of European Commission has made a last-ditch offer of aid to Greece in an effort to head off a looming default. At the same time, Greece’s finance minister has threatened legal action against the EU.
News agencies on Tuesday cited unnamed European Union and Greek government sources who said that Jean-Claude Juncker had offered to call an emergency meeting of eurozone finance ministers to approve an aid payment to Athens. According to the same sources, Greek Prime Minister Alexis Tsipras was to provide written confirmation that he would accept the terms of the offer that he had rejected as unacceptable just days ago.
However, there was no indication that Tsipras was about to change his mind, just hours after he announced that Greece had no intention of making a 1.6-billion-euro ($1.8 billion) payment of its debt.
Speaking in an interview on public television station ERT on Monday, Tsipras also called on Greeks to vote “No” in Sunday’s referendum on the last bailout offer from the creditors formerly known as the “troika,” the European Commission, the European Central Bank, and the International Monetary Fund.
“We ask you to reject it with all the might of your soul, with the greatest margin possible,” Tsipras said, despite the fact that it wasn’t even clear whether the offer was even still on the table. “The greater the participation and the rejection of this deal, the greater the possibility will be to restart the negotiations to set a course of logic and sustainability.”
Tsipras also hinted that he could resign if Greek voters didn’t comply with his wishes in the referendum that he called after walking away from the creditors’ latest offer last weekend.
Greeks are currently faced with capital controls allowing them to withdraw just 60 euros a day from ATMs that still had cash as several thousand demonstrated outside the parliament building in Athens against the creditors’ offer.

Threat of legal action
Meanwhile, in an interview with the British newspaper “The Telegraph” late on Monday, Greek Finance Minister Yanis Varoufakis said that Athens was prepared to take the European Union to court if it moved to expel it from the eurozone, the group of countries that use the euro common currency.
“The EU treaties make no provision for euro exit and we refuse to accept it,” Varoufakis said just hours before Athens was expected to fail to make a crucial 1.6-billion-euro ($1.8 billion) repayment on its financial bailout to the IMF.
“We are taking advice and will certainly consider an injunction at the European Court of Justice. The EU treaties make no provision for [a] euro exit and we refuse to accept it. Our membership is not negotiable,” he added.
Despite the intransigence of Greece’s left-wing government in the face of its looming default, Juncker wasn’t the only European leader who appeared reluctant to give up hope that a solution still could be found.
Following a crisis meeting in Berlin on Monday, Chancellor Angela Merkel said that the German government stood ready to reopen talks with Greece, no matter what the outcome of Sunday’s referendum is.

Report: Tsipras considering last-ditch aid offer from Brussels
Greek Prime Minister Alexis Tsipras is reported to be considering a last-ditch proposal from the European Commission aimed at staving off a looming default. Athens appears set to fail to make a key repayment to the IMF.
A report published on the English-language website of the Athens daily newspaper Kathimerini on Tuesday said Prime Minister Tsipras was considering a fresh offer made by European Commission President Jean-Claude Juncker.
“Kathimerini understands that the pressure caused by the closure of banks as well as the expiry of the Greek bailout program on Tuesday has caused some members of the government to urge Tsipras to accept Juncker’s offer,” the paper said.
Earlier, news agencies cited both European Union and Greek government officials who said that Juncker’s offer was essentially the same as the one that Tsipras and his Finance Minister Yanis Varoufakis, walked away from at the weekend. According the reports, Juncker has offered to call an emergency meeting of eurozone finance ministers to approve an aid package that would allow Athens to avoid default by putting it in a position to make the 1.6-billion-euro ($1.8 billion) repayment of previous debt to the IMF, which is due by the end of this Tuesday.
However, to unlock the funds, not only would Tsipras have to accept the creditors’ conditions – something that he has so far refused to do – but he would also have to reverse his recommendation on next Sunday’s referendum on the bailout package, recommending that Greeks accept, rather than reject the financial aid. The final stipulation is that he responds positively in time for Juncker to convene the meeting before the end of Tuesday.
Amid the latest report, a Greek government press conference scheduled for midday was postponed, and was expected to be rescheduled for sometime in the afternoon. The Reuters news agency also cited an unnamed Greek government source who confirmed that “there are initiatives,” without providing further details.

Possible about-face?
If Tsipras were to suddenly accept the offer made by the creditors, the European Commission, the European Central Bank and the IMF, it would be a major reversal, coming just hours after he appeared on Greek television to tell his fellow countrymen to vote against the offer in the referendum.
“The greater the participation and the rejection of this deal, the greater the possibility will be to restart the negotiations to set a course of logic and sustainability,” he told public broadcaster ERT Monday night.
He also said that Greece, which is widely thought not to have the funds to make the payment to the IMF, had no intention of doing so.
At the same time, Finance Minister Varoufakis also appeared to be in a defiant mood, telling the British newspaper “The Telegraph” that Athens would take the EU to court if it moved to expel it from the eurozone.
“We are taking advice and will certainly consider an injunction at the European Court of Justice. The EU treaties make no provision for [a] euro exit and we refuse to accept it. Our membership is not negotiable,” Varoufakis said.

Germany: I said so, Greece will not meet IMF repayment – Finance Minister Schäuble

Finance Minister Wolfgang Schäuble has told German public television that Greece will not meet its June repayment to the International Monetary Fund, which is due on Tuesday. He said Germany remained “prepared to help.”
On Monday, German Finance Minister Wolfgang Schäuble told ARD television that Greece would not make a June 30 payment worth 1.6 billion euros ($1.8 billion) to the IMF. The IMF, based in Washington, DC, had no immediate comment.
“Greece has announced that it will not pay the IMF, so that eliminates any future payments from the IMF,” Schäuble told the news show “Brennpunkt” (Focus), referring to loans the institution might have made to Athens later. “This government has destroyed all confidence,” Schäuble said of the Syriza regime, which took power in January on a platform of ending a half-decade of harsh austerity measures imposed by international creditors encouraged most vocally by Germany.
Schäuble called Greece’s performance in the weekend’s credit negotiations, which ultimately failed, “unbelievable.” He stopped just short of criticizing the decision to put any accord before Greek voters.
“This is a Greek matter,” Schäuble told ARD on Monday. “Now they want to hold this referendum, and if, after the referendum, Greece asks, ‘Could we talk about it?’, we are prepared to, but we will start from the beginning,” he added, noting that Greece had already received two credit extensions under the current programme.
Schäuble also said that if Greek voters did not approve a plan agreed to with international creditors it would create new uncertainties. “How can we trust that the government will really do something?” he said the eurozone finance ministers had asked their Greek counterpart, Yanis Varoufakis, on Saturday.
Schäuble said that whatever happened the euro would remain intact – perhaps in an effort to assuage his boss and fellow austerity advocate, German Chancellor Angela Merkel, who had said that “if the euro fails, Europe fails.”
“Greece was always a unique case,” Schäuble told ARD. “On Saturday, we said with great clarity and decisiveness – and we stand by it – that we will do everything to keep the euro stable,” he said of the meeting of finance ministers. “Through these incomprehensible and difficult-to-finish negotiations … the euro will not be destabilized,” he added.
Markets had their vote on Monday, tumbling under fears of a default.

‘Prepared to help’
On Sunday, Tsipras urged Greeks to keep calm after his government imposed capital controls and said it would keep banks closed until next Sunday’s referendum. Since Friday night alone, over 1.3 billion euros have been withdrawn from the Greek banking system, according to the head of the bank workers’ union Stavros Koukos.
Cash withdrawals from automated teller machines were capped at 60 euros a day for Greeks. Tourists, the pita and hummus of Greece’s economy, were told the ATM withdrawal limit did not apply to people using foreign credit and debit cards. The government has also made public transport in the Athens region, where 40 percent of Greece’s population lives, free while the banks remain closed.
Should Greece default on its payment to the IMF as Schäuble predicts, the country could lose the euro as its currency. All is not lost, though, the German finance minister told ARD on Monday.
“We remain prepared to help Greece and the Greek people,” Schäuble said.
Fresh ideas would be welcomed in Athens, Schäuble’s Greek counterpart told a German newspaper. The government remained “open to new proposals by the institutions,” the mass-circulation daily Bild quoted Varoufakis as saying in an interview published Sunday.

OPINION: Is the will gone?
Where there’s a will, there’s a way: German Chancellor Merkel has replaced the proverb with her catchphrase, “If the euro fails, Europe fails” – which fits the situation better, says DW’s Dagmar Engel.
Where is the most powerful woman in Europe at the beginning of the week of decisions? You certainly won’t find her on the front pages of Greek newspapers. Angela Merkel has managed to evade being portrayed as an evil German wearing a spiked helmet or Nazi uniform, as she was in Greek media a few years ago, when the seemingly endless Greek debt drama reached one of many peaks.
The German chancellor sends clear signals: We, the Germans, and I, the head of the German government, are not the ones to determine the well-being of others. Germany is one of 28 EU nations, one of 19 in the eurozone. A single nation does not make the decisions in the European Union; they are made together.
At the beginning of this crucial week, Angela Merkel celebrates the 70th anniversary of her party, the Christian Democratic Union (CDU). “Europe thrives on the ability to find compromises,” said the chancellor in her speech to party members. And she spoke of the rules being respected, rules such as “solidarity and responsibility.” The chancellor is convinced that if Germans betrayed their rules, they would be betraying their values.
Last week, a certain German personality unexpectedly applauded Angela Merkel for the caution she exercised as a leader in the Greek crisis: Helmut Schmidt, a former German chancellor and Social Democrat. He said he was impressed, for normally, any time Germans showed leadership qualities, other nations would recall the Nazi era and turn against the Germans, but this was not the case with Merkel.
Schmidt is 97 years old and his age may justify his status as a wise old man with experience, but a lot has changed, as have expectations of Germany’s role. Observers of world politics and world media look around and often find themselves asking: Where is Angela Merkel?
For the past year and a half, Germany’s president, defense minister and foreign minister have been discussing how Germany should assume greater responsibility internationally. The notion is not popular. Angela Merkel was accordingly absent when the matter of her role in the world arose.
At the beginning of this week of decisions, Angela Merkel once again comes up with the sentence she does not fondly remember: If the euro fails, Europe fails. She has not defined the moment when the euro could be considered a failure nor if Greece has an impact. But it is a great catchphrase that deserves more exposure because it shows how Angela Merkel, the leader of EU’s economically strongest and most populous country, is doing everything possible to prevent Europe from failing – together with her country’s partners, but if need be, in a leadership role that is not necessarily likable.

INTERVIEW

Vote ‘Yes’ in Sunday’s referendum – Professor Christopher Pissarides, Nobel economist urges Greek voters

Nobel Prize-winning economist Christopher Pissarides tells DW why he is deeply disappointed with the Greek government’s mismanagement of the debt crisis. He also explains what Germany could have done better.

DW: The Greek banking system has been shut down and capital controls are in effect as the Greek crisis has escalated dramatically over the last couple of days. Would you ever have thought it could come to this?
I did actually, when I saw the run on the banks when the Greek government started saying ‘No’ and they really didn’t seem to be willing to negotiate something that would keep them firmly in the euro. In fact, they made a mistake in delaying the capital controls for so long, and as a result, they now have to be much more severe than they had to be. In Cyprus, which is the only other example we have in the eurozone, they were very effective, but the restrictions there were up to 300 euros a day, whereas in Greece it is 60 euros. The Cypriots were also much more lenient with the use of credit cards abroad, allowing money to go abroad to pay for medical care, studies etc., whereas the Greeks don’t have all that. They were forced to shut it down completely now. But under the circumstances, it was the only thing that could help them avoid bankruptcy this week.

Does the dire and very complex situation surrounding Greece have any historical precedent, what with a deadline to accept the creditor’s proposals running out on Tuesday, and a Greek referendum on the proposals not scheduled until next Sunday?
Not as far as I know. The only other example is Argentina more than 10 years ago, and I don’t know exactly how they managed the details, but at that time there was mismanagement. And I have to confess now that I see the whole development of Greek economic policy since the election of Syriza in January, it’s really one long story of economic mismanagement. I am not saying they should have agreed immediately to what they were offered then. But play to your deadlines, don’t wait until they default and declare a referendum a week later and ask for an extension. What was wrong with the previous six months? They did ask for various extensions, of course, two or three times at least, but not together. Now, with the benefit of hindsight, the whole issue has obviously been mismanaged by the Greek government and that’s how we ended up in this situation. And I hope the vote in the referendum is a resounding Yes – although the opinion polls don’t appear to show it that way – just to show that the Greeks do want to stay in the euro and they want to sit down at the negotiating table and work out something feasible for the benefit of both Europe and Greece.

You’ve mentioned the mismanagement by the Greek government. Germany is also playing a key role in the management of this crisis. How would you rate Germany’s handling of the crisis?
It is really interesting that you would ask this. I don’t really agree with the policy that was requested of the Greeks. I am not saying the German suggestions of what they call the institutional suggestions to Greece are right. In fact, the Greeks should have negotiated strongly against some of the measures – against the higher taxes, against the austerity. But there is a difference between what you are proposing and how you are negotiating and how you are going about that negotiation. In January, when the new Greek government was elected, in fact, I had a piece in the Financial Times with Joseph Stiglitz and other economists saying that we don’t agree with the programme presented to the Greek government and there should be a better indication of what you are going to do with the debt and how these proposals would affect unemployment. But what we were hoping to see would be a kind of well-thought-out programme of negotiation and counterproposals by the Greek government that pointed to the reforms that they were going to undertake to improve the performance of the economy. As a result, it would have then been easier to put pressure on Germany and the other partners in the European Union to say something more about the debt. What we have seen instead from the European institutional side – with the support of Germany – is an insistence on certain policies that are not necessarily good for Greece and the Greeks going about it in a haphazard way, sometimes saying ‘No’ to this or ‘No’ to that; then taking a break of weeks without saying anything; then going back to the negotiating table saying we want something else and we want postponement. That’s what I mean by mismanagement. I think the Greeks had something strong to stand on, given the proposals in January, but they didn’t quite negotiate the way they could have done from the beginning to get what they wanted and avoid this crisis now.

What needs to be done now to find a way out of this conundrum?
Now, the only thing that can be done – and I am really hoping for it – is to get a Yes vote. The only thing that could get us moving in a good direction is a Yes vote and a strong government to sit there and renegotiate some parts of the programme. I know the suggestions have been withdrawn by the European institutions, but I am sure if there is a Yes vote, especially if there is a good majority, they would come back to the negotiating table and negotiate something on the debt, negotiate some immediate policy needed now to get us into a reform programme and move forward from there. I can’t see how a No vote would help anything at all now.

So you definitely would vote Yes?
I would vote Yes and I would encourage everyone that I can to vote Yes, because a No vote would be a complete dead end which would lead eventually to a Grexit. In that case, I cannot see how you can stay in the euro and hope to get sufficient liquidity from the European Central Bank to run a banking system and get the economy to recover and move again. Greece would be going backwards and backwards into more recession.

Do you think Greece will be able to remain in the eurozone?
If there is a Yes vote, Greece will definitely stay in the eurozone. If there is a No vote, the chances are that Greece would leave. There is a very small chance that they manage to work something out that eventually doesn’t throw them out of the eurozone. My view – a combination of expectation and hope – is that the Greeks are going to see that there is a lot of political propaganda currently being thrown at them by the government. With the banks closed, they are going to see how difficult it would be to run the banking system and get on with their normal business if there is no support from the European Central Bank, and so I hope they vote Yes on Sunday. And then, as of Monday, we start a new year with a commitment by the Greek public that they want to make the sacrifices necessary to stay in the euro.

With all the frantic actions and talk about the Greek crisis, isn’t the big elephant in the room that Greece simply won’t be able to pay back its debts?
That is true. And that’s what I meant when I said that it would have been much better from the way I see it if Germany and the others had said okay, we are going to renegotiate the debt situation. We tried to do it in 2012 with the haircut. It obviously failed because it left Greece with a debt that is still not serviceable. So, let’s sit down and offer something so that Tsipras and his colleagues can go back to the Greek public and say, ‘look we got something out of the other side.’ We now have promises on the debt, let’s now accept what they are suggesting so we can move forward and see the debt proposals materialize. I think that’s where Germany has mismanaged.

Professor Christopher Pissarides was awarded the 2010 Nobel Prize in Economics, jointly with Dale Mortensen of Northwestern University and Peter Diamond of MIT, for his work in the economics of markets with frictions. He is professor of Economics at the London School of Economics, professor of European Studies at the University of Cyprus and chairman of the Council of National Economy of the Republic of Cyprus, and professor-at-large of the Hong Kong University of Science and Technology.

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