Greek Gov’t Rejects Terms of Relief Funds, Risks Expulsion From Euro
For weeks, Tsipras has been reluctant to accept the terms of the offer because they call for a cut in government spending — cuts the prime minister believes would take money from Greek workers’ wages and state-funded pensions.
The European Central Bank and IMF have been negotiating with Greece for weeks to reach an agreement, which would release the remaining funds from a $7 billion bailout fund Athens has drawn from in the past. Greece, though, has resisted.
Creditors haven’t backed down from their demands for cuts in spending because they say such a reduction is necessary to facilitate economic growth and mitigate future repayment risk. Athens must make a $1.7 billion repayment to the IMF by Tuesday to avoid default, possible bankruptcy and possible exclusion from the euro.
Tsipras, however, has already said multiple times that the Greek government doesn’t have the money to fulfill the payment.
Eurozone finance ministers will meet again Saturday to try and reach a solution, but some analysts believe that is unlikely because both sides reportedly remain far apart on the terms of a deal. Officials said Thursday that the weekend negotiations will be the last chance to strike a deal.
Friday, Tsipras said he will recommend voters in his country reject the proposed bailout terms in a July 5 referendum.
Most economic policy makers were surprised by Tsipras’ call for a referendum, although he informed German Chancellor Angela Merkel and French President Francois Hollande about the vote beforehand, the Wall Street Journal reported.
If Greece can’t reach a deal with creditors, it would become the first developed nation in history to default on the IMF.
Defaulting on the loan, analysts say, might cause the ECB to curtail funding it has provided to Greek banks in recent weeks to keep them operating during the crisis. Account holders in those banks have so far withdrawn tens of billions of euros as the stalemate has escalated.
Tsipras said Friday that, although he opposes creditors’ terms, he will respect the outcome of the public’s July 5 vote. By then, however, it might be too late, analysts say — because the payment is due by June 30 and it’s unlikely those creditors will provide an extension, given Athens’ refusals of previous relief offers.
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