Greece’s creditors have put the finishing touches to a take-it-or-leave-it deal that will be submitted to the Athens government today.
But in an indication of the extreme political sensitivities surrounding any agreement the Greek Prime Minister, Alexis Tsipras, insisted to reporters that Athens had submitted its own final proposal to lenders, in an attempt to show Greek voters he is not being dictated to.
"We have submitted a realistic plan for Greece to exit the crisis – a realistic plan, whose acceptance by the institutions, our lenders and our partners in Europe will mark the end of … divisions in Europe," Mr Tsipras said. "It is now clear that the decision on whether they want to adjust to realism… rests with the political leadership of Europe."
Despite the creditors' plan – put together with input from the head of the International Monetary Fund and the European Central Bank this week – there are no guarantees Greece will sign up. "As long as it doesn’t meet [our] economic conditions we can’t come to an agreement," Mr Tsipras said.
Some have suggested Mr Tsipras may need to put the plan to the Greek population in a national referendum.
His government is fast running out of money and is due to repay €300m (£220m) to the IMF on Friday – plus a further €1.3bn by the end of the month. Athens needs to do a deal with its IMF and eurozone creditors to unlock a €7.2bn bailout payment it needs to meet its imminent liabilities and retain access for its banks to emergency funding from the European Central Bank. Without that funding Greece could default and crash out of the eurozone.
Talks have foundered on questions of pension and labour market reforms, with Athens arguing its anti-austerity election mandate in January ruled out the measures being pushed by its creditors.
Another stumbling bloc is the primary budget surplus targets that will be demanded of Greece. Reports suggested the text of the agreement could require a primary surplus of about 1 per cent of GDP this year, lower than the 3 per cent originally required in the current bailout programme but still requiring further austerity.
Jeroen Dijsselbloem, head of the Eurogroup of eurozone finance ministers, said there are signs Greece wants a deal, but he added that it will need to tell its voters that it will not be able to meet all its election promises.
Greek two-year interest rates eased 183 basis points to 23 per cent on the reports of a draft plan. Elsewhere markets were also upbeat. German 10-year bund yields spiked 17 basis points to 0.71 per cent, the biggest one day move since August 2012, triggered by better-than-expected eurozone inflation figures.
Annual consumer price inflation across the bloc was 0.3 per cent in May, higher than analysts had expected, and easing fears over of deflationary stagnation for the bloc.Reuse content