Greek Standoff Takes Another Twist as Dueling Plans Are Drafted

The brinkmanship over Greece’s future intensified after Prime Minister Alexis Tsipras said his government submitted a new proposal aimed at breaking the stalemate just as creditors set about finalizing theirs.

Tsipras is waiting for European leaders to show their hand after they held top-level talks in Berlin on Monday night aimed at hatching a plan to unlock funds and avoid the country defaulting. The goal of the meeting was to hammer out an offer from creditor institutions that Greece could consider in coming days, according to two people familiar with the plan. The Greek government said it hadn’t received any draft agreement.

“After submitting a complete proposal for a deal last night to institutions, we are not waiting for them to submit their own plan back to us,” Tsipras told reporters on Tuesday. “Greece is the one that submits the plan.”

After four months of antagonism and extended deadlines, there’s evidence now of greater urgency in efforts to end the impasse and decide Greece’s fate. The euro rallied on Tuesday, gaining as much as 1 percent earlier to $1.1039.

Berlin Huddle

While Greece says it can make a debt repayment to the International Monetary Fund on Friday, it’s the smallest of four totaling almost 1.6 billion euros ($1.78 billion) this month. The timing coincides with the expiration of a euro-region bailout by the end of June.

The meeting in Berlin at the German Chancellery involved Angela Merkel, IMF chief Christine Lagarde, European Central Bank President Mario Draghi, French President Francois Hollande and European Commission President Jean-Claude Juncker.

Representatives from the creditor institutions have wrapped up their proposal in substance, a person familiar with the matter said. Creditors are still polishing the document, said the person, who asked not to be identified as talks are private.

Merkel’s office said in a statement only that the five leaders “agreed that work must now be continued with greater intensity” and that “they have been in closest contact in recent days and want to remain so in the coming days, both among themselves and naturally also with the Greek government.”

Greek Markets

Greek bonds rose, with the yield on the two-year security falling 64 basis points to 24.3 percent as of 2:38 p.m. in Athens. The Athens Stock Exchange Index dropped 1 percent. Financial markets in Greece opened after shutting on Monday for the Orthodox Pentecost holiday.

European Union Economic Commissioner Pierre Moscovici said there was “real progress” in talks, though he didn’t comment specifically about the Berlin meeting. He told French radio that the European bailout fund was included in negotiations over releasing aid, raising the prospect that it could play a role in any deal to break the standoff.

Greece is seeking to access about 7 billion euros from its existing bailout before confronting any need for another rescue package. Sticking points have included budget measures, pension reforms and changes to Greece’s labor laws, with Tsipras’s anti-austerity government talking about red lines it can’t cross when seeking a compromise.

Greek central bank Governor Yannis Stournaras said the country shouldn’t raise taxes, though it could end some exemptions. The country and its creditors should now aim to agree on “a more reasonable primary surplus in the future and, in exchange for this, more structural changes,” he said at an event in London on Tuesday.

“Even a mediocre agreement is much better than the alternative for Greece, which is bankruptcy,” said Nicholas Economides, professor of economics at New York University’s Stern School of Business. “Bankruptcy within the euro would be very difficult to manage and would require tremendous support from the ECB, which is unlikely.”


Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.