With Loan Deadline Looming, Europe Offers Greece a Last-Minute Deal

By ANDREW HIGGINS and ALISON SMALE, New York Times

BRUSSELS — Seeking to calm a whirlwind of uncertainty that has battered global markets, opened deep fissures in European unity and threatened to push Greece out of the eurozone, European leaders insisted on Monday that a deal was still possible to settle Greece’s spiraling debt crisis. But they gave no indication that this could happen before Athens runs out of cash to pay loans due on Tuesday.

With only a day left before Greece’s current bailout package expires and the deadline arrives for a loan repayment of about $1.8 billion, alarm that it might miss the payment and eventually crash out of the group of 19 countries that use the euro prompted a flurry of statements from Brussels and major European leaders. They mixed reassurance and rebukes directed at Greece’s left-wing government with grave warnings that Europe’s future was at stake.

Chancellor Angela Merkel of Germany, Europe’s dominant figure, spoke out twice on the Greek crisis, and both times revived a phrase she used years ago, during another financial storm set off by Greece: “If the euro fails, Europe fails.” This means, she said, that “we have principles” that reflect “the trust we have in each other,” but also that “we must always seek compromise.”

The Greek government closed b anks and stock markets in an attempt to keep the country’s financial system afloat after the European Central Bank announced Sunday that it would not increase emergency funding to Greek banks. That decision sent Greeks rushing to A.T.M.s to withdraw cash, though they were limited to 60 euros, about $67.

Late Monday, Jean-Claude Juncker, the head of the European Union’s executive branch, offered the Greek prime minister, Alex Tsipras, a last-minute proposal that offered the possibility of a concession on demands for cuts in bonus payments for the poorest pensioners, European officials said. In return, however, Mr. Tsipras would have to accept all of the other creditors’ demands, which he had already turned down, and request an emergency meeting of eurozone finance ministers on Tuesday.

Greek officials said they had received Mr. Juncker’s proposal but did not say how the government would respond.

In an interview on Greek state television on Monday night, Mr. Tsipras strongly suggested that Greece would not make the payment to the International Monetary Fund on Tuesday, and seemed to express surprise that the fund expected to be paid. “How is it possible the creditors are waiting for the I.M.F. payment while our banks are being asphyxiated?” he said. “If they decide to stop the asphyxiation, the installments will be paid.”

After five months of fruitless and increasingly ill-tempered talks with creditors, Mr. Tsipras threw the search for an agreement, and his country’s banking system, into turmoil early Saturday by announcing a referendum for Sunday on whether to accept proposals his government has rejected. Government officials said early Tuesday that Mr. Tsipras would vote “no” on Sunday.

Some analysts warned Monday that the tussle could drag into late July, when Greece owes the European Central Bank €3.5 billion for purchases of Greek government bonds.

“The real hard stop for the Greek government is the E.C.B.’s repayment on July 20,” said Mujtaba Rahman, the Europe director for the Eurasia Group, a political risk consulting firm.

 

While insisting that Greece must stay within Europe’s common currency and the 28-nation European Union, Mr. Juncker displayed the depth of anger in Brussels and elsewhere at Greece’s leftist government, complaining earlier Monday that he felt “betrayed” by Athens and that negotiations were “not a game of liar’s poker.”

President François Hollande of France assured Greece and financial markets that an agreement was still possible and that Paris wanted Greece to stay in the euro, while also assuring the French public that it would be safe from the turbulence that shook Europe four years ago, when it last looked as if Greece might drop out of the euro.

France, Mr. Hollande said in a statement, “has nothing to fear from what could happen.”

An aide to the French president, speaking on the condition of anonymity to discuss diplomatic matters, said Mr. Hollande had spoken by telephone with President Obama. “They agreed to pool their efforts to facilitate a resumption of the talks so as to find a solution to the crisis as soon as possible and ensure Greece’s financial stability,” the aide said.

Global markets showed anxiety but no immediate signs of panic. Stocks slumped modestly on Monday at the opening on Wall Street, after markets in Asia and Europe were battered by worries that the Greek financial crisis would prove contagious and Chinese investors endured another topsy-turvy session.

It was clear from her demeanor and her meetings with the party leaders that Ms. Merkel did not want Greece to leave the euro or to see European unity fail.

Mr. Juncker, looking to avoid responsibility in the event of a rupture between Greece and Europe, accused Mr. Tsipras of acting in bad faith. “All elements were on the table,” he said in Brussels. But, he added, Mr. Tsipras “left the talks at the worst moment” and without warning.

In an unusually blunt critique of a member government, Mr. Juncker said Mr. Tsipras’s negotiating tactics were “not worthy of the great Greek nation.”

Ms. Merkel, who has been in power almost a decade and has been criticized in the Greek crisis for rigidly advocating austerity, advised against appearing to tell the Greeks how to vote. “They are mature citizens” and can make up their own minds, she said, calling the crisis a “decisive challenge” for Europe.

Europe is better equipped to deal with that challenge than it was a few years ago, she added, voicing confidence that the euro was stable and secure.

Sigmar Gabriel, head of Germany’s Social Democrats, said European unity was facing its greatest crisis in 60 years. He stopped short, however, of echoing calls from the German opposition for heads of state and government to meet as soon as possible. He stressed that Greece was not the only crisis facing Europe and cited the flow of migrants and the rise of nationalist movements.

“Europe cannot give permanent financial aid with no conditions,” he said.