‘Last attempt’ debt negotiations fail as Greece rejects more austerity

Reuters / Murad Sezer
Crucial negotiations between Greece and its creditors ended in deadlock after less than an hour of talks, paving the way for a potential default and even a possible Grexit, unless a “significant gap” is somehow bridged before the June 30 deadline.

“While some progress was made, the talks did not succeed as there remains a significant gap,”the commission said after the meeting.“On this basis, further discussion will now have to take place in the Eurogroup,”which will take up the matter in Luxembourg next Thursday.

Athens is pressed for time to pay 1.6 billion euros in interest to the International Monetary Fund (IMF) by the end of this month. If an agreement is not reached by June 30, Greece will forfeit access to rescue loans needed to make regular debt payments, and avoid a default that could force Greece out of the euro.

READ MORE: ‘No progress’: IMF walks out of bailout talks with Greece

The negotiations have become deadlocked as Greece has refused to meet the demands of Brussels, the ECB and the IMF. Greek Prime Minister Alexis Tsipras says he will not compromise on pension cuts, tax rises and targets for budget surplus in order to make interest payments.

The Greek delegation failed to convince the creditors to release the last tranche of 7.2 billion euros left in Greece’s 240 billion-euro bailout fund.

“The Greek proposals remain incomplete,” the commission said after ending the brief session.

“This is very disappointing and sad. It was a last attempt to bridge our differences but the gap is too large. One can discuss a gap, but this is an ocean,” a source informed of the talks told Reuters.

The gap amounts to 2 billion euros a year in permanent budget savings. The rift after the weekend’s talks amounted to “the order of one half to one percentage of GDP,” an EU official told the Associated Press.

The EU said Athens had moved closer on primary surplus negotiations, but presented no road map on how to achieve it. The Greek delegation, led by Deputy Prime Minister Yannis Dragasakis, had offered nothing new, the EU claimed.

Dragasakis said the delegation wanted to resume negotiations, but blamed the creditors for insisting on austerity measures to close the gap.

Greece has made “supplementary proposals that totally cover the fiscal gap and primary surpluses” and open “the way to a final deal,” Dragasakis said.

Meanwhile in Germany, the backbone of the EU economy, officials and politicians voiced their concern over the lack of progress in the talks.

“A couple of game theorists in the Greek government believe that, in the end, the fear in Europe that Greece might leave (the euro) is so great that we’ll agree to anything. That’s not the case,” Germany's Economy Minister Sigmar Gabriel told German public broadcaster ARD.

In a separate piece in the Bild newspaper, Gabriel said that the EU’s “patience” is running out, as well as the “time” to reach a compromise.

“Everywhere in Europe, the sentiment is growing that enough is enough,” said Gabriel, who is vice-chancellor in Angela Merkel’s grand coalition government. “The shadow of an exit of Greece from the euro zone takes on ever clearer shape.”

“A Grexit must be factored in if the Greek government doesn’t do what it’s long been called upon to do,” Michael Grosse-Broemer, MP from the Christian Democratic-led bloc, said in a ZDF television interview on Sunday.