Greece’s cabinet will huddle with the prime minister on Sunday to map out its strategy for a meeting the next day 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 in order to avoid a default on its debt.
Months of back and forth with creditors have left banks living day-to-day on European Central Bank funding. Panicked depositors have withdrawn 30 billion euros ($34 billion) since December and 4 billion euros the past week alone. 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 meeting on Saturday. “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
In a sign that Greece may not bend to creditor demands, Minister of State Nikos Pappas said red-lines include no cuts to pension plans and wages, and a comprehensive review of the country’s onerous debt load.
The Frankfurter Allgemeine Sonntagszeitung newspaper said Greece may gain an extension of the current aid program to at least September as well as some funds, provided that Greece agrees to EU Commission proposals. It didn’t cite anyone.
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.
Tsipras Trip Canceled
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.
Separately, 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. About 1.85 billion euros was withdrawn in the last two days alone, according to a person familiar with the matter.
“We are in the midst of great turbulence,” Tsipras said 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.”
Greek Finance Minister Yanis Varoufakis, in an opinion piece published Saturday by The Irish Times, blamed his European counterparts for showing no willingness Thursday to consider his “well thought-out” proposals.
“Regrettably, my presentation was met with deafening silence,” Varoufakis wrote.
In an interview published in Brussels-based l’Echo newspaper, Varoufakis said he doesn’t want Greece to abandon the euro and is optimistic differences will be overcome. He also warned that the ruling Syriza party would be replaced by neo-Nazis if Greece ends up defaulting and leaving the euro.
Tsipras on Saturday canceled a planned trip to Strasbourg on June 23. No reason was given.
“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.”