Europe gives Greece final ultimatum

By Zeke Turner

Five days or Grexit, European leaders warn at Tuesday’s emergency summit.

European leaders gave Greece until the end of the week to propose an acceptable rescue plan, warning that the alternative was a “black scenario” of bankruptcy, the collapse of its financial system and a Grexit from the eurozone.

“The stark reality is that we have only five days left to find the ultimate agreement. The final deadline ends this week,” Donald Tusk, the European Council president, said after Tuesday’s emergency summit of eurozone leaders. The meeting broke up without any concrete proposals from Greek Prime Minister Alexis Tsipras.
“Unfortunately we can’t exclude the black scenario,” Tusk said.
Offering Greece yet another lifeline, they insisted that this time was the last, the 18 other eurozone countries said that Athens had until Friday morning to present a program of economic reforms to its creditors — the European Union, the European Central Bank and the International Monetary Fund — in exchange for billions of euros in fresh loans.
Any proposal would be assessed by the Eurogroup of the other 18 eurozone finance ministers on Saturday in Brussels.
The EU called another emergency summit for Sunday to discuss a possible last-gasp Greek rescue, if it comes together, or plan for its bankruptcy and possible expulsion from the eurozone — a threat that they have avoided making explicit before.

The Grexit plan

“We have a ‘Grexit’ scenario prepared in detail. We have a scenario as far as humanitarian aid is concerned,” said Jean-Claude Juncker, president of the European Commission. “I’m strongly against Grexit but I can’t prevent it if the Greek government is not doing what we are expecting the Greek government to do.”
Merkel said any short-term financial aid for Greece in the form of a bridge loan depends on Athens’ commitment to long-term economic reform, including to its tax system, pensions and an overhaul of its state structures. In a referendum on Sunday, Greeks overwhelmingly rejected the kind of austerity measures that Merkel has prescribed.
“The order is totally clear: First the long-term proposals and then the conversation about short-term financing that would be connected with prior actions,” Merkel said.
Under the scenario sketched out by the German leader, a bridge loan, if approved, would carry Greece financially through the next few weeks, buying time for negotiations on a third large rescue program “that leads Greece to a sustainable situation.”
Greece is teetering on the brink of an economic collapse. Its banks are closed for a second consecutive week; people and businesses are running out of money; hospitals and pharmacies are starting to report shortages; and the country may not be able to pay for oil and gas imports. Athens has already defaulted on a €1.5 billion payment to the IMF last week, and faces a further €3.5 billion payment to the ECB on July 20.
Leaving the summit, a grinning Tsipras said Greece would respect the time frame given by its creditors and promised an agreement by the end of the week “at the latest,” according to the Proto Thema newspaper.
He said there was a “positive climate” in the room and that the other leaders understood that this was not just “a Greek problem but a European one.”
In his post-summit briefing, a visibly furious Juncker slapped the podium and denounced the aggressive anti-European rhetoric used by the Greek government during the referendum campaign last week.
“I’m strongly in favor of keeping Greece in the euro area,” he added, “but now the Greek government — and the Greek government was not capable to do this tonight — has to tell us where they are heading.”
Even the one European leader who has defended Tsipras in the past week, French President François Hollande, said that he was preparing for the worst, saying that France “will study the Grexit if negotiations fail.”

Debt relief standoff

Earlier Tuesday the other eurozone finance ministers were dismayed that the Greek delegation showed up with no written proposals. The new Greek Finance Minister Euclid Tsakalotos did give a verbal presentation.
Throughout five months of difficult and fruitless talks with creditors since his far-left Syria party came to power, Tsipras has pushed on creditors to ease the Greek debt burden, currently about 180 percent of GDP. Briefing reporters Tuesday, the Greek prime minister repeated his demand for a “start of substantive talks for necessary debt restructuring,” though an EU diplomat said Tsipras had a “different attitude” in the closed-door meeting Tuesday night and “wasn’t aggressively insisting on debt relief” as previously.
Juncker said debt relief could not be discussed before October. Other eurozone countries, especially those in Central Europe that have gone through crises and restructuring and are now growing again, adamantly oppose any relief for Greece. “Debt write-down is an absolute red line for my country,” said Peter Kažimir, Slovakia’s finance minister.

Renzi angry

As the prolonged crisis approaches a climax this month, relations between other eurozone members are becoming visibly strained. At one point during Tuesday’s discussions between leaders, Italian Prime Minister Matteo Renzi argued with Hollande over a series of separate meetings that had taken place before the summit without all eurozone leaders present, according to a diplomatic source.
Renzi was upset that there had been bilateral discussions Monday between the French and German leaders Monday and a three-way meeting Tuesday between Hollande, Merkel and Juncker.
Tsipras spoke to U.S. President Barack Obama by phone earlier Tuesday, and Obama in turn called Merkel. According to a statement from the White House, Obama stressed the importance of finding a solution.