Greece asks for new three-year EU rescue programme

Greek Finance Minister Euclid Tsakalotos

Greece has requested a new three-year rescue programme from its European partners just hours ahead of a deadline to come up with a detailed economic reform plan.

As its banking system teetered near the edge, the Greek government extended bank closures into next week, while international creditors were in open disagreement over whether to award the country debt relief – with Germany at odds with the International Monetary Fund (IMF).

Without a deal, Greece faces an almost inevitable collapse of its banking system, which would be the first step for the country to fall out of the euro.

As today’s deadline loomed, the government sought to reassure its European creditors that it would enact tax and pension reforms quickly in exchange for loans from Europe’s bailout fund, the European Stability Mechanism (ESM).

In a formal request that was filled with vague promises but short on details, the Greek government vowed to “immediately implement a set of measures as early as the beginning of next week” – but did not specify what these were.

After months of fruitless negotiations with the Greek government, the sceptical eurozone creditor states have said they want to see a detailed, cost-accounted plan of the reforms by today.

That is meant to give enough time to review the plan before all 28 leaders of the full European Union meet on Sunday in what has been termed as Greece’s last chance to stay in the euro.

But Greece’s major creditors were hardly in lock-step over what path to take in dealing with the struggling but defiant EU member nation.

IMF chief Christine Lagarde reiterated yesterday that Greece’s massive debt would need restructuring, something that Germany – Greece’s largest European lender – has resisted.

Speaking in Washington, Ms Lagarde said Greece needed to continue cost-cutting reforms, but added: “The other leg is debt restructuring, which we believe is needed … for debt sustainability.”

“It well may be that the numbers may have to be revisited, but our analysis has not changed,” she said of the need for granting Greece better repayment terms.

US treasury secretary Jack Lew added to pressure on the European lenders, arguing debt relief was needed for a deal – and describing a Greek euro-exit, or “Grexit”, as a “geopolitical mistake”.

“I don’t think any prime minister of Greece could sell all the additional fiscal measures, plus the structural reforms that are needed without some sense of what the debt sustainability looks like,” he said.

Earlier yesterday, Greek prime minister Alexis Tsipras said his country was seeking a deal that would bring a definitive end to his country’s financial crisis.

Greece has had two bailouts from its European partners and the IMF since May 2010, totalling €240bn.

Mr Tsipras told lawmakers at the European Parliament in Strasbourg, France: “We need to ensure the medium-term funding of our country with a development and growth programme.”

Applause rose from left-wing lawmakers in the turbulent chamber when Mr Tsipras said aid to Greece has only helped banks, not ordinary Greeks, as some held up “No” signs to back Greek voters’ rejection of more austerity.

Mr Tsipras insisted he has “no hidden agenda” to drive Greece out of the euro and that last Sunday’s referendum in which Greeks roundly rejected more belt-tightening reforms does not mean a break with Europe.

The head of a conservative group in the parliament, Belgium’s Guy Verhofstadt, said he was “furious” at Mr Tsipras’ failure to spell out specifics of his reform plans.

Mr Tsipras said Greece’s troubles predated his arrival in office in January and condemned the “austerity experiment” his country has endured over the past five years that he blames for spiralling unemployment and poverty.

“We demand an agreement with our neighbours, but one that gives us a sign that we are on a long-lasting basis exiting from the crisis – which will demonstrate to us that there is light at the end of the tunnel,” he said.

In Greece, meanwhile, people already struggling with eight days of shuttered banks and limits on money withdrawals learned the finance ministry was extending the closures until next Monday.

Greeks cannot withdraw more than 60 euro (about £43) a day from cash machines and are unable to send money abroad, including to pay bills or to stock their businesses, without special permission.

The head of France’s central bank said he feared the “collapse” of the Greek economy and “chaos” if Greece does not strike a deal by Sunday.

In unusually strong language, Christian Noyer told Europe-1 radio he predicted “riots” in Greece if no deal is reached.

He also indicated the European Central Bank would effectively pull the plug on its emergency liquidity measures for Greek banks if no deal is struck.

Highlighting the rising anger with Mr Tsipras, European Commission president Jean-Claude Juncker had a stark warning for Greece after Tuesday’s eurozone summit.

“We have a Grexit scenario, prepared in detail,” he said, apparently referring to the situation in which Greece would be forced out of the currency union.