Greece's creditors have offered a package of up to 15.5 billion euros ($17.3 billion) of aid and a five month extension of the bailout in an effort to force Greek Prime Minister Alexis Tsipras to accept pension, tax and other austerity conditions that he says are based on blackmail and ultimatum.
German Chancellor Angela Merkel implored the Greeks to accept the "generous" offer."
Yet it appeared that Prime Minister Tsipras, speaking to reporters in Brussels after the EU summit, rejected the new European deal.
“He would defend the EU’s founding principles of “democracy, solidarity, equality, mutual respect” as he pursues an accord. “These principles were not based on blackmails and ultimatums, and especially in these crucial times no one has the right to put in danger these principles," as reported by Bloomberg.
The euro dropped sharply against the dollar and the yen as Tsipras' comments were reported mid-morning. The united currency ran stops below 1.1160 to a low of 1.1120.
When the current rescue package expire on Tuesday Greece will lose access to the last 7.2 billion euros in bailout funds if a deal or extension is not agreed with its creditors. Negotiations with the European Central Bank, the International Monetary Fund and the European Commission have been at a standoff for four months.
Greece also owes a 1.5 billion euro payment to the IMF on Tuesday that its officials said they cannot make without additional European funds.
Chancellor Merkel and the group of European finance minister have said that a deal must be closed by this weekend. In practicality it need to be completed at the Saturday EU finance ministers meeting in Brussels (2 p.m. local time), to enable several countries to pass the necessary enabling legislation before the Tuesday deadline.
Failure to close a deal by the weekend would make capital controls on Greek banks a virtual necessity to prevent a collapse of the banking system if the ECB withdraws liquidity support as it has said it will do without a deal.
Greek banks have been subsisting on weekly injections of cash from the ECB as depositors have withdrawn about 20 percent of total funds over the past year as fears of an exit from the euro have intensified.
The European proposal is conditioned on what it calls 'prior actions' by the Athens government before it unlocks the rescue funds. But with the IMF debt due on Tuesday, it is unclear what actions the Greeks can take in the short amount of time left except perhaps to pass legislation to implement the required reforms.
However, the problem that the Europeans are trying to address with the new bailout terms is implementation not accession. The previous government of Prime Minister Antonis Samaras had agreed to many of the reforms that are being insisted on now, but they proved either unable or unwilling to implement them to the satisfactions of its creditors.
That is the primary reason the European are insisting on spending cuts and VAT increases, that have a reasonable chance of producing revenue rather than the tax hikes offered by Athens that have in the past been impossible to collect.
"The proposed package foresees payouts to Greece of 8.7 billion euros from the European Financial Stability Facility, 3.5 billion euros from the International Monetary Fund and 3.3 billion euros in central-bank profits on bond purchases, the official told reporters," accordingly Bloomberg. "Of the 3.3 billion euros in so-called SMP profits, 1.8 billion euros would be paid immediately, the official said. Angela Gaviria, an IMF spokeswoman, declined comment on the creditor proposal.
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