World Economy

EC Pushing Tsipras to Accept Bailout Deal

EC Pushing Tsipras to  Accept Bailout DealEC Pushing Tsipras to  Accept Bailout Deal

The head of the European Commission made a last-minute offer to try to persuade Greek Prime Minister Alexis Tsipras to accept a bailout deal he has rejected before a referendum on Sunday which EU partners say will be a choice of whether to stay in the euro.

There was no official response from the leftwing government, elected in January on a promise to end austerity, but Greek daily Kathimerini reported that Tsipras had told Brussels he was considering the move, CBCNews reported.

A Greek official told Reuters: “There has been a lot of movement in the last few hours, in the direction of a new proposal.”

After months of wrangling and acrimony, the growing possibility that Athens could be forced out of the single currency brought into sharp focus the chaos that could be unleashed in Greece as well as the danger that would arise for the stability of the euro.

“What would happen if Greece came out of the euro? There would be a negative message that euro membership is reversible,” said Spanish Prime Minister Mariano Rajoy, who a week ago declared that he did not fear contagion from Greece.

“People may think that if one country can leave the euro, others could do so in the future. I think that is the most serious problem that could arise.”

EU and Greek government sources said Jean-Claude Juncker had offered to convene an emergency meeting of eurozone finance ministers on Tuesday to approve an aid payment to prevent Athens defaulting, if Tsipras sent a written acceptance of the terms.

The last-ditch bid from Brussels came as uncertainty built ahead of Sunday’s referendum, with a string of European leaders warning that it would effectively be a choice between remaining in the euro or reverting to the drachma.

Opinion polls show Greeks in favor of holding on to the euro but a rally of tens of thousands of anti-austerity protestors in Athens on Monday highlighted the defiance many in Greece feel about being pushed into a corner by the lenders.

Tsipras broke off negotiations with the Commission, the IMF and the European Central Bank and announced early on Saturday a referendum on the bailout terms next Sunday, giving voters just one week to debate the fundamental issues at stake.

 Unknown Territory

French Finance Minister Michel Sapin, who has been most sympathetic to Athens in the negotiations, said in a television interview that negotiations could continue if Greeks voted “Yes” on Sunday, but added: “With a ‘no’, we go into an unknown territory.”

As the hours ticked by before the bailout officially expires later on Tuesday, Greek officials have said the government will not make a €1.6 billion ($1.79 billion) debt repayment to the IMF which also falls due on the same day.

If that does not happen, IMF Managing Director Christine Lagarde will immediately report to the global lender’s board at close of business, Washington time, that Greece is “in arrears”–the official euphemism for default.

It will be the first time in the history of the IMF that an advanced economy has defaulted on a loan from the world’s financial backstop, putting Athens in the same bracket as Zimbabwe, Sudan and Cuba.

 High Unemployment

Greece has received nearly €240 billion in two EU/IMF bailouts since 2010. Leftist Finance Minister Yanis Varoufakis argues that Athens has had no benefit from the money, which largely went to repay German and French banks which had imprudently lent large sums to successive Greek governments.

The Greek economy has shrunk by more than 25% since 2009 and unemployment has soared to over 25%, including more than 50% of young job seekers.