An emergency session of the European Council ended without a breakthrough to save Greece from bankruptcy on Monday night but leaders said they were cautiously optimistic a deal could be done later in the week.
Time is short. Without the final €7.2 billion tranche of its €240 billion bailout, Greece could probably not pay off a €1.5 billion loan from the International Monetary Fund by the end of the month.
Another €3.5 billion in Greek bond redemptions is due in the middle of July.
Greece’s insistence on relief from the austerity measures to which its financial support is tied has so far stopped the eurozone from finding a way to prevent one of its members from defaulting on its debt obligations for the first time.
European Commission president Jean-Claude Juncker nevertheless told reporters that last-minute policy proposals from the Greek side had raised hopes of an agreement.
Jeroen Dijsselbloem, the Dutch chairman of the eurozone finance ministers, called the latest document a “basis to really restart the talks.”
But the proposals were only submitted early Monday morning, leaving officials without enough time to study them in detail.
Austria’s finance minister, Hans Jörg Schelling, complained, “We all came here for a meeting that really has no chance at an agreement because the documents weren’t ready.”
A meeting of eurozone finance ministers broke up in the afternoon with nothing to show for it. A crisis summit of government leaders, called by European Council president Donald Tusk before the weekend, similarly failed to find a resolution, deferring the matter back to another conference of finance ministers on Wednesday.
Leaders are due to reconvene in Brussels the following day for their regular European Council summit.
German chancellor Angela Merkel — whose country holds €63.5 of Greece’s €324 billion debt — was cautious. “I can’t give any guarantee that that will happen,” she said of a final agreement. “There’s still a lot of work to be done.”
Merkel has reportedly been at odds with her hawkish finance minister, Wolfgang Schäuble, about how far other countries should go to keep Greece in the eurozone.
Adding urgency to the crisis is the precarious state of Greece’s financial sector. Fearing default and a possible Greek exit from the eurozone, savers have reportedly withdrawn up to €6 billion from their accounts in the last week. Usually, only between €200 and €300 million is taken out of Greek banks on a given day.
The European Central Bank provides emergency funding to Greece’s banks. But if no agreement is reached on the future of its bailout this week, the bank may be hard-pressed to justify continuing support while eurozone parliaments could be unable to return from summer recess in time to debate and approve a deal.
Greece’s demands for relief from fiscal consolidation and economic reform have exhausted the patience of its creditors. Most Germans now tell pollsters they would rather the Balkan country left the single currency union.
Bild, Germany’s largest tabloid newspaper, argued on Monday there was no future for Greece in the euro. “It’s time to let Greece go from the euro, in the hope of a better future,” it said.
After months of fruitless negotiations in which the country’s far-left leaders refused to walk back their promises to tear up the bailout, Greece agreed to raise the retirement age to 67 and increase sales taxes to 23 percent on Monday in an effort to find common ground.
Earlier, Prime Minister Alexis Tsipras had lambasted other European states for making “absurd proposals and displaying a total indifference to the recent democratic choice of the Greek people.”
Immediately after winning the election in January, Tsipras reneged on the terms of Greece’s bailout by canceling the privatization of the country’s largest seaport and public power utility.
His government next moved to raise the minimum wage, rehire thousands of civil servants and restore collective bargaining as well as a thirteenth month of pensions. Such policy changes would violate the commitments previous Greek administrations have made in order to qualify for financial support.