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Greek officials say Finance Minister Yanis Varoufakis will try to persuade his EU counterparts to back Athens' proposal from earlier this week

Greece And Creditors ‘Even Further Apart’

WT24 Desk

Germany’s finance minister has expressed pessimism that a deal can be struck between Greece and its international lenders over the country’s debt crisis, Sky News reports.  Wolfgang Schaeuble said the two sides were “even further apart” as talks took place in Brussels between the Greek Prime Minister Alexis Tsipras and the International Monetary Fund (IMF) and European Central Bank (ECB).

The creditors have presented Athens with new proposals over the economic reforms it wants made in an attempt to find a breakthrough over its bailout. But Greece was still not on board, raising fresh doubts about whether it was possible to clinch a deal before the end of June.However, Mr Tsipras said he was confident of reaching a compromise despite a deadlock in the talks.

Greece badly needs €7.2bn from the creditors to keep its economy going and to help with a €1.6bn payment it has to make to the IMF by next Tuesday.According to Greek officials at the talks, creditors were seeking a different mix of austerity measures than those proposed by Athens, making the cuts more immediate. They included broad pension cuts, higher revenue from sales tax, and a faster elimination of tax exemptions – demands that are likely to fuel dissent within the government if accepted.

Nineteen eurozone finance ministers have also returned to the negotiating table in Brussels today in an attempt to finalise a deal and avoid a default by Athens – which could lead to Greece leaving the single currency. Their deliberations are taking place alongside a meeting of EU leaders, who are holding a two-day summit in Brussels. They will almost certainly find themselves drawn into the Greek debt negotiations.

Hopes of a settlement faded after the IMF cast doubts on Greece’s new debt plan. The proposals put forward by Athens aim to raise €8bn, mostly through new taxes on the wealthy and businesses, early retirement restrictions, VAT increases and a cut in defence spending. But the IMF was cautious about the mix of reforms Greece proposed, saying they rely too heavily on tax increases that can hurt the economy.

It wants more spending cuts because of the possible effect of tax rises on businesses. IMF director Christine Lagarde was adamant the Greek plans were not viable. “You can’t build a programme just on the promise of improved tax collection, as we have heard for the past five years with very little result,” she told French Challenges magazine. Stock markets across Europe have closed down after the IMF’s negative reaction to the proposals.

Assuming an eleventh-hour deal is thrashed out with the EU and IMF, Mr Tspiras still needs to convince his anti-austerity Syriza party to approve concessions needed to unblock the desperately needed bailout funds. He only has a slim majority within the Greek parliament and opposition within his own party to proposed concessions means ratification in Greece is by no means assured.

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