Greece Refuses “Irrational” Offer

Greece's Prime Minister Alexis Tsipras checks his notes during an emergency Parliament session in Athens, on Friday, June 5, 2015. Tsipras said that his government cannot accept "irrational" proposals like one made this week by the institutions overseeing Greece's bailout, and insisted any solution must also include some form of debt relief.(AP Photo/Petros Giannakouris)

ATHENS — Greece cannot accept the “irrational” proposal made this week by the institutions overseeing its bailout, Prime Minister Alexis Tsipras said during an emergency Parliament session June 5, adding that any deal must also include some form of debt relief.

His speech came the morning after a surprise announcement that Greece would defer an IMF payment due June 5, and would instead bundle all four installments due in June — a total of 1.6 billion euros — into one payment at the end of the month.

It is the first time a developed economy has taken the option of bundling payments — an emergency maneuver allowed by the IMF but last used by Zambia in the 1980s.

The move highlighted the brinkmanship of Greece’s protracted negotiations to release the remaining funds in its international bailout, and the dire state of the country’s liquidity.

It sent the Athens Stock Exchange tumbling to close down nearly 5 percent, while the country’s borrowing costs shot up, with the interest rate on the country’s two-year bonds standing at 24.5 percent.

Without the 7.2 billion euros left in the 240 billion euro bailout it has been relying on since 2010, Greece will be unable to meet its steep debt repayments to the IMF and the European Central Bank over the next few months. Bankruptcy looms, and with it a potential exit from the euro.

“Although Greece’s liquidity situation is extremely delicate, the decision to delay the payments seems to have at least a partial political motivation,” said Diego Iscaro, Senior Economist at HIS Global Insight.

“Essentially, the payment delay serves as a way to express the government’s frustration over the ‘last best offer’ made by creditors to Greece.”

Tsipras faces growing anger from within his own radical left SYRIZA party, where hardliners, including some Cabinet members, have been calling for a break with creditors.

At least two ministers said that if the lenders don’t back down, one option would be to call for elections and ask Greeks whether they want to remain in the euro at any cost.

Tsipras made no mention of such a possibility, however, in his first speech to lawmakers on the course of his government’s troubled four-month negotiations.

Tsipras said he was “unpleasantly surprised” by the proposal put forward by the International Monetary Fund, the European Central Bank and the European Commission — the three institutions overseeing Greece’s bailout — during his visit to Brussels this week for talks with commission head Jean-Claude Juncker.

“I would like to believe that this proposal was an unfortunate moment for Europe, or at least a bad negotiating trick, and will very soon be withdrawn by the same people who thought it up,” he said.

Still, he said, he believed a deal was now closer than ever. What Greece needs, Tsipras insisted, is a solution to what he described as a vicious circle of austerity and debt leading to economic contraction and poverty.

“We don’t just need an agreement; we need a definitive solution, both for Greece and for Europe, that will finally end the talk of a Greek exit from the eurozone.”

Opposition parties have been incensed by the government’s negotiating tactics, accusing it of squandering both time and any goodwill the country had left, and endangering the nation’s future.

“You must stop the lies and the ideological fixations. A third bailout is coming in September,” said main opposition New Democracy head Antonis Samaras, referring to the possibility of Greece needing additional rescue loans after the current deal expires.

“You have lost the plot — totally lost your targets — and driven Greece back to recession,” he added. “Your mistakes are very expensive for the country.”

The institutions’ proposal, Tsipras said, insisted on the austerity which has accompanied Greece’s bailout since it first began five years ago and which the government blames for the dire state of the country’s economy, which has contracted by a quarter.

“The fiscal strangulation of a country is a moral issue that conflicts with Europe’s founding principles — which raises well-founded questions on Europe’s future,” he said.

Top Eurozone official Jeroen Dijsselbloem, the Dutch Finance Minister, insisted Europe wanted to ensure Greece’s economy was put back on track, but warned time was running out and the ball was in Athens’ court.

“We want to pull together a plan to put Greece back on a solid financial and economic path. They are a long way from that and could get even further away,” he said earlier in the day.

“They can’t only take pleasant measures, they also have to take tough measures and that is what the Greek government has to recognize. That also means that if they want to come up with alternatives to our proposal that they have to add up financially and be economically responsible. We’re waiting for those proposals.”