Greece’s cabinet was locked in talks with the prime minister ahead of a meeting on Monday that will decide the nation’s future in Europe’s currency bloc.
On the agenda at the meeting in Prime Minister Alexis Tsipras’ residence is whether to compromise on election promises to avoid a default. Among the measures being discussed are new taxes, the elimination of early retirement allowances and a levy on companies, a Greek government official said.
Months of back and forth with creditors have left banks living day-to-day on European Central Bank funding. Panicked depositors have withdrawn more than 30 billion euros ($34 billion) since December. Without a deal at a European Union leaders summit on Monday, Greece faces the specter of capital controls and what U.S. Treasury Secretary Jacob J. Lew said was a “terrible” economic decline.
“Austerity must end,” government spokesman Gabriel Sakellaridis said after Greek negotiators ended a separate meeting on Saturday with Tsipras. “A different Europe is necessary, a different Europe is possible.”
With markets closed, the weekend gives negotiators some room to lay out a roadmap for what will be a high-stakes week with an emergency summit of EU chiefs on Monday in Brussels. The clock is running down on a June 30 deadline to make payments and work out a new deal amid disagreements on pensions, sales tax and spending targets.
Greek Red Lines
Greece’s government remains defiant on some key issues. Minister of State Nikos Pappas, in an interview with Ethnos newspaper published Saturday, said red-lines include no cuts to pension plans and wages, and a comprehensive review of the country’s onerous debt load.
Greek Finance Minister Yanis Varoufakis, in opinion pieces for The Irish Times and Frankfurter Allgemeine Sonntagszeitung, blamed his European counterparts for their unwillingness to consider Greece’s proposals. He warned of the rise of neo-Nazism if the country defaults and exits the euro, while expressing optimism that differences will be overcome.
“We are in the midst of great turbulence,” Tsipras said last week in St. Petersburg. “But we are a nation of seafarers, who know how to deal with storms, and aren’t afraid to sail to distant oceans, to uncharted waters, in search of a safe harbor.
For today’s cabinet meeting, most ministers arrived in cars to the prime minister’s gated premises, situated on a leafy Athens street behind parliament lined with orange trees. Others walked. Varoufakis rode in on his motorcycle.
To meet creditor demands for measures equal to 2.5 percent of GDP, Greece is considering proposals that include a levy on companies with annual net income of more than 500,000 euros and a higher ‘‘solidarity levy” for individuals earning more than 30,000 euros a year, a government official said, speaking on condition of anonymity because the plan hasn’t been finalized.
Greece’s creditors are also thinking considering their options, as pressure grows in some quarters for more leniency.
German Chancellor Angela Merkel and her French counterpart, Francois Hollande, spoke by phone on Friday. As leaders of the biggest economies in the 19-nation euro bloc, they’ve presented a united front against Tsipras, who has spent his months in power trying to roll back austerity policies.
It may be getting more difficult for Hollande to stand firm. On Saturday he received an appeal from lawmakers including some from the ruling Socialist Party to end the “financial blackmail” of Greece. The message of France “cannot be a docile reminder of the rules at a time when the house is burning,” the lawmakers said in an open letter published on the website of France’s Communist Party.
With its finances in tatters and banks bleeding deposits at record pace, it’s unclear how long Greece can hold out against the conditions attached to a fresh infusion of rescue loans.
Government supporters will gather in front of Parliament on Sunday night, with a separate pro-Europe rally planned for Monday.
“How did we end up like this? How did we become beggars? Defaulters?” Metropolitan Anthimos, bishop of Thessaloniki, Greece’s second biggest city, said in his Sunday sermon broadcast live on state TV. “If there’s no progress tomorrow, bank shutters will remain closed on Tuesday.”
Greece was given a few more days of financial breathing space from the ECB, which Friday increased again the maximum amount of emergency funding Greek banks can access.
On Monday, the ECB will revisit that emergency funding as deposits continue to flee Greek banks at dizzying rates.
“We need to get rid of any illusions that there will be a magic solution at the leaders’ level,” European Union President Donald Tusk said on Friday. “We are close to the point where the Greek government will have to choose between accepting what I believe is a good offer of continued support or to head towards default.”