Alexis Tsipras offers ‘definitive’ plan to EU

Athens/Brussels/London: Greek Prime Minister Alexis Tsipras is seeking a “definitive” solution for Greece in a proposal to European Union leaders on the eve of emergency talks that could decide the nation’s future in the euro.

Tsipras briefed German chancellor Angela Merkel, French President Francois Hollande and EU Commission president Jean- Claude Juncker on Greece’s proposal to unlock bailout funds in phone calls on Sunday, according to an emailed statement from the Greek Prime Minister’s office.

No details were provided on the content of the plan and the Greek government spokesman didn’t respond to phone calls and text messages seeking comment. An EU diplomat said the European Commission hasn’t received a new proposal from Greece. The diplomat, who was wasn’t authorized to discuss the matter publicly, said that Juncker spoke on Sunday with Tsipras, Merkel and IMF managing director Christine Lagarde. Representatives of Greece’s creditors would meet at 5pm in Brussels to discuss any new proposal from the country’s government, the diplomat said.

Sunday’s diplomatic flurry comes ahead of a meeting of EU leaders on Monday to resolve an impasse that has brought the cash-strapped country on the brink of default. Months of back and forth between Greece and its creditors have left the country’s banks living day-to-day on European Central Bank funding. Failure to strike an agreement for unlocking emergency loans by 30 June, when Greece’s euro area-backed bailout expires, will risk leaving the country unable to service its debt.

Tsipras’ anti-austerity coalition has rejected demands from creditors which would require Greece to slash pensions and hike sales taxes to qualify for an extension in aid. Instead, Tsipras has said that any solution should focus on the country’s unsustainable debt. The proposal on Sunday was for “for a mutually beneficial agreement, which will give a definitive solution, and not defer the problem,” according to the statement.

Earlier Sunday, a Greek government official said the plan included elimination of early retirement options as of next year, an increase on tax surcharges that mid and high-income earners pay, as well as a levy on companies with annual net income over €500,000. The official asked not to be named as the plans were not finalized and were subject to approval by the Greek cabinet which met on Sunday.

Tsipras plans to travel to Brussels after the cabinet meeting where he discussed Greece’s proposals with his ministers. Euro-area finance ministers will also meet on Monday while the ECB will re-assess emergency funding for Greece’s banks as deposits continue to flee at dizzying rates.

Austrian finance minister Hans Joerg Schelling said on ORF Television on Sunday that he expects Greek banks will reopen without problems on Monday, adding that Greece needs to implement reforms.

“Timing isn’t on Greece’s side,” even if the government agrees to terms and conditions of a bailout agreement with its creditors, Maltese finance minister Edward Scicluna said in a phone interview on Sunday.

For Greeks, the fear is that Monday will be deja vu, a return to a past not that distant. Before the euro replaced the drachma in 2002, the Greeks were already a European bête noire, their currency mostly trapped inside their nation, where cash was king and checks a novelty.

Since December, Greeks have been preparing for a weekend such as this, pulling more than €30 billion out of banks. Week after week, the Bank of Greece borrowed banknotes from the rest of the continent to replenish this hoarding of the one asset Greeks still trust—cold, hard cash. Its liabilities to the rest of the euro area for the excess physical cash it has to put into circulation quadrupled between December and April, the last month for which there’s available data.

Without access to capital markets, Greek lenders have to rely on almost €86 billion of Emergency Liquidity Assistance to stay afloat, subject to weekly boosts by the European Central Bank. This time, it didn’t last a week. On Friday, the ceiling of the so-called ELA was raised by €1.8 billion, just a couple of days after a €1.1 billion injection. On Monday, the banks will be back, asking for more.

Without at least an understanding among the political chiefs, Greek banks will reach the limits of their available collateral for more ECB aid. The country then may have to impose capital controls to stem the withdrawals, said David Mackie, an analyst at JPMorgan Chase Bank in London.

“How did we end up like this? How did we become beggars? Defaulters? Everyone says we owe money,” said Metropolitan Anthimos, bishop of Thessaloniki, Greece’s second biggest city, in his Sunday sermon broadcast live on state TV. “If there’s no progress tomorrow, bank shutters will remain closed on Tuesday,” he told his flock.

This is not how it was supposed to end. So sure were Greeks of the permanence of the euro that when they minted their own €1 coin, they paid homage to a 5th century drachma, among the world’s oldest currencies.

Before the European project, Greece had spent decades in turmoil. Since the Nazi occupation during World War II—still an irritant during 21st century bailout talks—it has seen a civil war, a military junta, a tussle between Communists and anti-communists and in the 1980’s, an inflation rate over 20%.

A member of NATO since 1952, the 11-million strong nation joined a precursor to what became the European Union in 1981, allowing it, finally, full access to international debt markets.

Those very markets, coupled with an embrace of Europe, kick-started two decades of increased public spending on pensions and government jobs, and private investment in shipping and infrastructure. Bloomberg

Theophilos Argitis in Ottawa, Karl Stagno Navarra in Luxembourg, Antonis Galanopoulos in Athens and Claudia Rach in Berlin contributed to this story.