Ministers push Greece to brink of default

Eurozone finance ministers are pushing Greece to the brink of default adjourning any decision on the latest compromise deal until tomorrow.

Behind the scenes arrangements were being made to put capital controls in place — preventing people taking any more money from their bank accounts on Monday — in case there is no deal, according to two sources.

Taoiseach Enda Kenny caused confusion when he said he did not support Greek demands for debt relief that would see the maturity of its debt extended — a key request and one that the IMF and the ECB supports.

His department later clarified that he supported debt reprofiling “in the context of implementation of an overall agreement”, which would have much the same effect as debt relief.

Mr Kenny advised Greek Prime Minister Alexis Tsipras not to increase income tax, Vat, or social welfare contributions as they intend, but rather, like Ireland, to adopt measures that “keep a pro-growth policy that made our country competitive and provide jobs for our people”.

The IMF argued that the Greek proposal to increase corporation tax to 29% should be increased to 28% to encourage jobs and growth. Most of the other measures were aimed at increasing Vat and reducing its pensions bill.

Mr Tsipras thanked his fellow prime ministers for their advice during the summit but said he had to think of the families relying on pensions — reputedly 45% of families rely on pensions compared to 36% who rely on wages. “It’s not a game for us,” he said.

The EU leaders refused to negotiate with him, saying is a job for the finance ministers. Earlier, the Eurogroup meeting of finance minister broke up after just an hour as there was still no agreed deal on the table. They will reconvene tomorrow.

The leaders were expected to return to the issue last night and intimate to Mr Tsipras that if he accepts the deal on the table, they will restructure the debt in the autumn when they will need to agree a third Greek bailout.

A source pointed out that this will be needed for the IMF as it can only support countries whose debt is sustainable. When this becomes an issue for the institute in the autumn, the EU will deal with this, reproofing the debt and possibly forgiving some of it — something Ireland did not seek or receive.

There is some optimism that Mr Tsipras will agree a deal tomorrow. If so, it would be put to the Greek parliament on Sunday, and if it was accepted there, then the German Bundestag would vote on it on Monday.

Once the Greeks were assured of the €7.6bn due from their current bailout, they could use whatever funds they could lay their hands on to pay the IMF its €1.6bn on Tuesday, knowing it would be replaced by the creditors later in the month.


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