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Greece may call snap election to break impasse

Greece delayed repayment of an IMF loan yesterday and a deputy minister said Athens might call snap elections to break an impasse with lenders that threatens to push the country into bankruptcy and out of the euro.

European stocks fell and Greek bond yields shot higher as investors worried that months of bitter negotiations between Greece and its international creditors might yet end in failure.

Raising the stakes in the talks, Greece decided to postpone payment of the €300m loan — a highly unusual step, but one that does not yet signal a formal default.

The surprise decision was taken on Thursday, just hours after Prime Minister Alexis Tsipras was presented with a tough compromise deal from lenders that crossed many of his “red lines”, including tax hikes, privatisations and pension reform.

The offer is aimed at shoring up Greek state coffers, but it has triggered fury in Greece’s ruling Syriza party. Early elections would be a way to seek public legitimacy for the difficult decisions needed to secure more cash.

Greece’s bailout expires at the end of June and if no cash-for-reforms deal is done by then, default would seem certain, shunting the eurozone into uncharted waters and opening the way for Greece to exit the single currency.

Greek Economy Minister George Stathakis said the latest deal, drawn up earlier this week by top level officials, including German Chancellor Angela Merkel, was unacceptable, but stressed his country did not want to leave the eurozone.

“Our government has a mandate to remain in the euro and get a better deal ... to try to change the terms of the agreement that we have with European partners,” he said. “Greece has to remain within the euro.”

An opinion poll published yesterday on the website Newsit showed that three out of four Greeks wanted to stay in the 19-nation eurozone, while almost one in two was in favour of the government reaching a compromise deal.

Some 37% of people questioned in the Alco survey supported early elections to resolve the standoff.

“It is more likely that there will be elections than not,” Costas Panagopoulos, the head of Alco pollster, told Greek radio.

Mr Tsipras had indicated late on Wednesday that Athens would hand back the IMF loan yesterday. But less than 24 hours later, his government changed direction, deciding instead to bundle together some €1.6bn it owes the Washington-based lender in June into a single payment at the end of the month.

It was the first time in five years of crisis that Greece has postponed a repayment on its €240bn bailouts from eurozone governments, the ECB and the IMF. The IMF said the manoeuvre was unorthodox, but permissible.

Mr Stratoulis, close to the far-left of the Syriza party, made clear the decision was a negotiating tactic.

Greece’s bluechip stock index tumbled 4.7%. Many analysts expect a last-minute aid deal that would avert a Greek exit from the euro but say the coming weeks could see further ructions in Greek politics, keeping markets on edge.

“Fasten your seat belts for what could be a rough ride in Greece,” said Berenberg Bank chief economist Holger Schmieding. Mr Tsipras has consistently demanded debt relief from lenders as a key component of any agreement with them.

Reuters with additional reporting by Irish Examiner