EU meeting is about to start to find ways to contain the possible tsunami and contagion of a Grexit which is now fast becoming a reality as the Greek Prime Minster, Alexis Tsipras, is reaching out to Russia.
There is now 100% possibility that the Greeks will officially declare a default after its Debt Committee declared all debts to Troika odious and illegal.
Alexis Tsipras has argued this morning that Greece cannot accept pension cuts.
Writing in Der Tagesspiegel, Tsipras pointed out that pensioners are actually the main breadwinner in many Greek families:
The social security system is the institutionalized mechanism of intergenerational solidarity, and its sustainability is a main concern for society as a whole. Traditionally, this solidarity has meant that young people, through their contributions, fund the pensions of their parents. But during the Greek crisis, we’ve witnessed this solidarity being reversed as the parents’ pensions fund the survival of their children. The pensions of the elderly are often the last refuge for entire families that have only one or no member working in a country with 25% unemployment in the general population, and 50% among young people.
Faced with such a situation we cannot adopt the logic of blind and horizontal cuts, as some have asked us to do, which would result in dramatic social consequences.
Greek crisis: Ministers arrive for ‘very difficult’ Greek talks – live
Greek prime minister lands in Russia
The Greek PM is attending an economic forum in St Petersburg, and is due to meet President Putin tomorrow.
This has fueled talk that Moscow could offer Athens some help – perhaps a credit line, to help it handle debt repayments.
Greek officials have been defending the trip, though, arguing they are allowed to pursue a ‘multi-dimensional foreign policy’. And after all, Germany does a lot of business with Russia (before the Ukraine sanctions, anyway)
Not clear exactly what, at this stage, so we’ll keep you posted.
The EC and ECB have been resisting pressure from Athens, and the IMF, to consider the issue of Greece’s debt pile, which appears simply unsustainable at 180% of GDP.
My colleague Heather Stewart has looked at this issue, and explains:
When debt repayments reach a certain level, they undermine social solidarity because governments struggle to afford investment in schools, health and public services. And they undermine economic growth, because the state has to divert resources that could be spent on infrastructure, training and export support towards its foreign creditors.
In Athens, talk of euro exit is rife
Over in Athens there has been some fighting talk from senior members of the governing far left Syriza party this morning, reports our correspondent Helena Smith.
With no signs of a deal in sight, leading Syriza party cadres are now being asked, outright, whether euro exit is on the cards.
Speaking to Mega TV this morning, the party’s hardline social security minister Dimitris Stratoulis said the leftist-led government had already “taken measures” to ensure that ordinary Greeks did not suffer in the event of an agreement not being reached.
“We have seen to it that people won’t have a problem if we reach the point of having to say the big no,” he said, insisting that if Athens did not pay the IMF the €1.6bn it owes at the end of the month it would not amount to a credit event (default).
Presumably, with that in mind, Stratoulis also said that the government would have the means to pay public sector salaries and pensions “in July, August, September, October etc.”
“If we are forced to say the big no the difficulties will last for a few months …. but the consequences will be much worse for Europe.”
Thanasis Petrakos, Syriza’s parliamentary spokesman, reiterated that Athens would not give in to the “irrational demands” of lenders.
“We want to stay in the euro zone but we will not submit to blackmail, if our partners want to be logical we will come to an agreement,” he said told Star TV. “Currencies aren’t a religion,” he said to the surprise of the startled news anchor Popi Tsapanidou.
“Who said currencies are a religion? Nothing of the sort is written in our constitution.”
What was most important was that Greece did not return to the era of “memoranda” (the bailout agreement), he argued
Kostas Lapavitsas, the London University economics professor who is now a Syriza MP, agreed.
“That would mean death,” Lapavitsas told Star TV. “Now that we are in the euro what lenders are dong essentially means we have limited sovereignty.”
Any “adjustment period” that did take place in event of euro exit would only last a few months, he said.
“The idea that we can’t live with our own currency is absurd.”
Updated at 11.18am BST
Moscovici: Eurogroup will be difficult, but solution is possible
Moscovici told reporters that a solution can still be found, even at this late hour, if there are cool heads and political will.
“Today’s meeting might not be conclusive, we all know that, but it must be useful. It must be a meeting that opens the way for a solution, if we cannot find it today. We’ll try, we must try.”.
But the ball is still in the Greek court, he added (a phrase we have heard quite enough this week)
Updated at 11.15am BST
He told reporters:
“We’ll see what they bring to the table. I don’t know what Mr Varoufakis is coming up with. If there are reasonable proposals we will discuss them.
The Greek prime minister reportedly admitted to French president Francois Hollande that his partner, Peristera (Betty) Baziana, would leave him if he caves in to Greece’s creditors.
That’s according to French satirical magazine Le Canard Enchaîné, which claims Hollande said:
“[Tsipras] informed me that if he gave in to too many of the troika’s demands, he risked not only losing his party but also his partner, who is a fierce militant and is much farther left of him.”
Alexis and Betty have known each other for decades; she’s credited with having encouraging him to join the communist party.
As we wrote back in January:
The two have kept their 30-year relationship largely out of the public eye. Unlike the first ladies that have come before her, Batziana has so far stayed away from the glamour that will come with the Maximos mansion, the official seat of the Greek prime minister.
The flat she shares with her partner and their two young sons is in the heart of working class district Kypseli, in Athens.
That’s before today’s meeting of finance ministers kicks off (so to speak).
There’s a lot on the agenda, apart from Greece, so the meeting could last until 7pm BST.
Expectations, as I flagged up in the introduction, are not high. Or, as Hans Nichols of Bloomberg put it:
They’re below low. They’re subterranean.
Updated at 10.28am BST
The word ‘default’ is being bandied around the trading floor even more so, and there are only so many times dealers will stare at the sea of red screens before they jump ship. The left-wing Syriza is determined it will not be the first one to blink and the ECB continues to stand its ground, but playing chicken with people who have nothing to lose is a dangerous game.
The pressure is intense, even by Greek debt crisis standards, and one by one dealers are ducking of out the market.
Updated at 9.43am BST
Greek government “will go to the people” if no deal
Asked for his contingency plan in case Greece leaves the euro, he replies:
Our position is that if we have an economically feasible plan that doesn’t create recession and continue the debt trap we will sign.
If we don’t, we have to go to the Greek people because we have no mandate to leave the euro, and that would be a very bad eventuality.
But we will consult the Greek people. Becuase our mandate was the best possible deal within the euro, as we are pro-European.
If that is not on the cards, and if Europe says you can do whatever you want, you can vote what you want but in the end you always have to do the same policies, then we’ll have to reconsider with the Greek people what to do about that.
Speaking on the Today Programme, Euclid Tsakalotos argued that Grexit would radically change the nature of the single currency
My greatest fear as a progressive person, Taskalotos said, is that:
“once one country has left, you change a monetary union into a fixed exchange rate system, where it’s a cost-benefit analysis whether another country leaves”.
My greatest fear is that the break-up of the euro will return (us) to the competitive devaluations, and the nationalisms, and the kind of politics we had in the 1930s.”
But if Greece stays in, isn’t the lesson to other countries with similar problems is ‘we don’t actually need to pay our debt’?
No, Tsakalotos argues. the lesson is that we need to stop financial markets going on a lending spree:
When someone has borrowed too much, someone else has lent too much…
Cue much spluttering from John Humphrys – That’s like a drunk blaming the barman for selling him the drink.
Tsakalotos won’t take this lying down; he reminds Humphrys that Greece’s debt/GDP ratio has done up from 129% to 180% since its first bailout programme began. A different approach is needed.
Updated at 9.33am BST
Britain is a great political, economic and cultural force in Europe.
We owe Britain a lot – it gave us the first parliamentary democracy.
He mentioned Magna Carta, and the fact that many Britons lost their lives in the battle against Hitler Germany.
Without Britain, the EU’s foreign policy would have less weight.
But Europe can’t function like a sweet dispenser where everyone picks the best bits.
Europe does not work if everyone thinks only of their own advantages.
If the “I” becomes a “we” we can emerge from the crisis.
Updated at 9.09am BST
He accused the Syriza government, elected in January, of wasting its first few months in office by giving interviews – “I find this irresponsible.” He added that he got the impression that the Greek government didn’t really want to negotiate, and took issue with its branding of the IMF as “criminal”. But, he said:
It’s five to 12. I still hope we can get a fair solution.
Most indices are at fresh four-month lows:
As usual, Merkel delivered a very measured speech. The only stab at passion was when she said the euro is far more than just a currency.
Updated at 8.42am BST
That concludes Merkel’s statement – she has received a lot of applause from MPs in the German parliament.
Merkel: A deal is still possible
Greece was on a good path, but it has not been completed. It has dragged its heels on necessary structural reforms.
She is heckled when she says: “Self-responsibility and solidarity go hand in hand.”
She reiterates that Germany is working to keep Greece in the euro, using her mantra “where there is a will, there is a way”. A deal is still possible with Greece’s three international creditors – the EU, International Monetary Fund and European Central Bank.
Updated at 9.04am BST
The German chancellor says it’s not the first time that a member state has sought to clarify its role within the EU, but in the end, compromises were always found. She mentions Denmark in 1992 and Ireland in 2008.
I’m confident that we can achieve this this time. [i.e. keep Britain in the EU]
Updated at 8.39am BST
Britain needs to figure out itself what role it wants to play in Europe, she says.
Updated at 8.34am BST
Merkel is now talking about the eurozone. France and Germany will be pushing for the coordination of economic policies within the current treaties – to boost competitiveness and jobs, she says. This means more structural reforms by member states.
The EU summit will address immigration policy, she says, particularly the “tragedies” in the Mediterranean. Thousands of migrants have died trying to cross the Mediterranean in recent months, and thousands of others have been rescued.
After a brief mic malfunction, Merkel is speaking now.
Angela Merkel addresses German parliament
German chancellor Angela Merkel is due to give a statement on next week’s EU summit in the German parliament shortly. You can watch it live here.
Updated at 8.09am BST
French finance minister: Grexit would be a catastrophe
French finance minister Michel Sapin has set the tone for today’s meeting by warning it would be a “total catastrophe” for Greece if Athens left the eurozone.
France was doing all it could to find a deal, he told the France Info radio, adding:
“We will fight till the end to find an agreement with Greece.”
Updated at 8.01am BST
Here’s the pre-market predictions:
- FTSE100 is expected to open 20 points lower at 6,660
- DAX is expected to open 90 points lower at 10,888
- CAC40 is expected to open 35 points lower at 4,755
Last night, Fed chief Janet Yellen warned there will be “spillover effects” across the financial markets if the Greek crisis ends badly.
Michael Hewson of CMC Markets confirms that hopes for today’s meeting aren’t high:
Today’s Eurogroup meeting in Luxembourg has been touted as the “last chance saloon” for Greece to agree a deal in time for the end of June.
Regrettably the meeting is likely to come and go without any deal given that Greek officials have refused to submit any fresh proposals, and Greek Prime Minister is jetting off to Russia to see President Putin, which means we may well get some talks over the weekend.
In a sign of how bad things have got the Greek central bank broke with convention and abandoned its neutrality by criticising its incumbent government for the policies it was implementing, in a sign of the fissures opening up in the Greek establishment.
Updated at 7.53am BST
Introduction: Eurogroup meets, but hopes aren’t high
Finance ministers from across the eurozone are heading to Luxembourg today to discuss Greece, which has less than a fortnight to reach a deal with creditors before its bailout expires.
Hopes of a breakthrough are desperately low, though, despite fears of looming capital controls and Greece’s membership of the EU now at stake.
Today’s Eurogroup meeting had been inked in as the moment where Europe could rubber stamp a deal; instead, it could be another missed opportunity to make progress.
Both sides expect the other to make the next move, to close the gap between the measures Greece is prepared to take in return for bailout aid, and what creditors demand. Athens’ insistence that debt relief is needed – and Europe’s reluctance to address this – mean it could be a short discussion.
And without a deal very soon, Greece will simply be unable to repay the IMF the €1.6bn it owes on June 30.
Last night, Greek finance minister Yanis Varoufakis told ITN News he doesn’t expect a deal today, even though time is desperately short.
“This is the 11th hour.”
“The only sensible proposals on the table at the moment are those that we have tabled. The other side have not come to the party,”
The other side, though, insist that it’s Greece’s move in this long-running saga.
The meeting takes place this afternoon, but we should hear from ministers through the morning as they make their way to the meeting.
We’re also watching out for comments from Angela Merkel this morning, when she addresses MPs in Berlin.
We will be tracking all the key developments through the day…
Updated at 9.38am BST
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