Europe

Greek debt crisis: Eurozone leaders hopeful of deal

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Media captionAnti-austerity protesters clashed with pro-EU demonstrators in Athens

Eurozone leaders have broadly welcomed new proposals for Greek reforms amid hopes a deal can be struck within days to stop Greece defaulting on its debt.

German Chancellor Angela Merkel said Greece's latest offer constituted "some progress". But she said more work was needed and "time is short".

Greece must repay €1.6bn (£1.1bn) to the International Monetary Fund (IMF) by the end of the month.

If it fails to do so, it risks crashing out of the euro and possibly the EU.

Although no deal has been struck, key obstacles appear to have been cleared, the BBC's Damian Grammaticas reports from Brussels.

The deal being formed is believed to include:

  • New taxes on businesses and the wealthy
  • Selective increases in VAT
  • Savings in pensions linked to curbing early retirement and increasing pension contributions
  • No further reductions in pensions or public-sector wages - "red lines" for Greece's Syriza government

The move was received with cautious optimism by leaders of 18 other eurozone nations gathered for an emergency summit in Brussels.


Image copyright Reuters

Analysis: Robert Peston, BBC economics editor

There is a script which seemingly all eurozone leaders are urged to learn, which is that if the currency union is in the grips of crisis, no solution can or should be found till markets and economy are on the verge of a heart attack.

With almost no time left before a de facto default - and, more frighteningly perhaps, with a Greek banking system on the brink of total collapse because savers had lost all confidence that a rescue for their state could be found - Mr Tsipras has come up with a plan that his fellow eurozone leaders see, at last, as the basis for a deal.

So subject to technical talks, an actual deal to release life-saving additional loans for Greece may be reached at the end of the week.

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The European Central Bank (ECB) approved additional emergency funding for Greek banks to cover withdrawals, allowing banks to stay open and providing breathing space for a deal to be reached.

It has acted repeatedly after anxious savers withdrew more than €4bn in recent days.

The Greek banking system is on the verge of collapse due to savers' loss of confidence.

Eurozone finance ministers meet again on Wednesday. They hope to approve a package to be put to eurozone leaders for final endorsement on Thursday morning.

Even if eurozone finance ministers and the European Council agree to a deal, it still needs to be approved by the Greek parliament and eurozone governments by next Tuesday.


Tight schedule - the week ahead

  • Wednesday: Eurozone's 19 finance ministers meet to go through details of latest proposals
  • Thursday-Friday: Scheduled meeting of all 29 EU member states - any agreement could receive leaders' backing here
  • Saturday-Tuesday: Agreement will need to be approved by Greek parliament and other eurozone governments - including vote in German Bundestag
  • Tuesday 30 June: Deadline for Greek repayment of €1.6bn to IMF

Only once agreement is reached will creditors unlock the final €7.2bn tranche of bailout funds.

Mountain of debt

After talks ended on Monday evening, Mrs Merkel said that everyone taking part wanted Greece to stay in the eurozone, "myself included".

"The proposals offered by Greece today constitute some progress. However, it became clear during our discussions that there is a lot of work to be done and time is short," she said.

Mrs Merkel said she was open to considering debt relief - which Greek Prime Minister Alexis Tsipras says is needed to secure support for reforms at home - but only after the present negotiations are completed.

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Media caption"Greeks were living a nightmare" - Pensioners react to the prospect of a deal

Commentators say Greece's mountain of debt - worth almost 180% of its entire annual economic output - will need to be restructured if it is to escape the cycle of scrambling to secure funds to pay off looming bills to creditors.

Mr Tsipras also met the heads of Greece's three international creditors - the IMF, the European Commission and the ECB - in Brussels.

French President Francois Hollande said Greece and its creditors were "moving towards an accord" but there was "still work to be done".

European Commission President Jean-Claude Juncker and EU finance commissioner Pierre Moscovici both professed themselves "convinced" that a final agreement would be reached.

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Media captionGreece's economy minister Giorgios Stathakis told the BBC's Robert Peston that creditors accepted Greece's debt plan

But there has been some pessimism from Greece, with deputy parliament speaker and Syriza lawmaker Alexis Mitropoulos reportedly telling Greek TV that lawmakers would find it "difficult to pass" the latest package of reforms.

The issue is highly contested in Greece - with anti-austerity and pro-European protesters clashing in Athens on Monday night.

Pensioners are due to stage another rally on Tuesday afternoon.

Greece's left-wing Syriza government opposes reforms it says will impose unnecessary hardship.

It was elected in January 2015 on pledges it would end austerity.

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