BUSINESS

Greek prime minister heads to Brussels seeking to sway creditors on proposal for deal

06/03/2015 06:20 EDT | Updated 06/03/2016 05:59 EDT
ATHENS, Greece - Greece's prime minister headed for a showdown with key creditors on Wednesday in Brussels, where each side would present proposals to reach a deal that might unlock bailout loans and save the country from looming financial disaster.

The European Union's executive Commission dampened hopes of a quick breakthrough, however, even though Greece is running out of cash and faces debt repayments as soon as Friday.

Ahead of his meeting with Commission head Jean-Claude Juncker, Alexis Tsipras stressed the need for compromise.

"I will go to ... explain to him that today more than ever it is necessary for the (creditor) institutions and mainly for the political leadership of Europe to sign up to realism," Tsipras said before leaving for Brussels.

Greece has been negotiating for four months with its creditors over what budget reforms it should make to get the 7.2 billion euros ($8.1 billion) in loans that are left over in its bailout fund. Wednesday's meetings are part of a string of high-level diplomatic efforts to bring the negotiations to a successful end.

The eurozone's top financial official, Jeroen Dijsselbloem, was also heading to Brussels for the meeting, while Tsipras, German Chancellor Angela Merkel and French President Francois Hollande were expected to hold a teleconference during the day.

Meanwhile, the three institutions overseeing Greece's bailout — the International Monetary Fund, European Central Bank and European Commission — were to present Tsipras with their own proposal, German finance ministry spokesman Martin Jaeger said.

Speaking before leaving for Brussels, Tsipras said he had not yet received any document.

News of the Brussels trip was enough to encourage investors in Greece, where the main stock index closed up 4.1 per cent.

Time is pressing. Greece must repay 1.6 billion euros to the IMF this month alone. The first installment of just over 300 million euros is due Friday, with other installments on June 12, 16 and 19. Although Athens insists it intends to repay its debts, it is unclear how much longer it will be able to do so without outside help.

One option Greece could choose is to bundle this month's IMF payments into one on June 30, giving more time for negotiations. While allowed under IMF regulations, the option is rarely used.

Without bailout funds, Greece could eventually default on its debts and crash out of the euro, possibly pushing Europe and potentially the global economy into turmoil.

"We are working with high pressure" to find a solution, Merkel said in Berlin. "All work we are currently conducting is aimed at helping a deal to be found within the agreed timeframe," she added, refusing to be drawn on specifics.

Hollande said a delicate balance needed to be struck.

"Asking too much of Greece would prevent a return to growth in Greece. But not asking for anything, or not asking enough, would have consequences for the whole Eurozone," he said.

Tsipras says he submitted his proposal to creditors on Monday night but gave no details of what fiscal reforms Greece was suggesting in return for its final bailout funds. The creditors said much work remained to be done.

Greece needs the loans because it is locked out of the international bond markets as wary investors demand prohibitively high interest rates to lend it money. The country has not received bailout funds since August.

So far it has managed to scrape together enough to repay its debts by seizing the reserves of state enterprises, including municipalities, schools, embassies and hospitals. But those funds will not be enough to sustain the country through the summer, when it also faces large ECB repayments.

Elected in January on promises to repeal the deeply resented austerity measures Greece had to impose in return for its five-year bailout, Tsipras said his government had made concessions during the negotiations.

The 40-year-old premier faces dissent from hardliners from within his own party, some of whom openly say they prefer a rupture in negotiations and an exit from the euro, to capitulation on pre-election promises.

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Raf Casert in Brussels, Kirsten Grieshaber in Berlin and Sylvie Corbet in Paris contributed.

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This story has been corrected to show that Jaeger did not say the call between Merkel, Hollande and Tsipras was postponed and that the call was still expected Wednesday.