Greece, which has a first of a series of repayments to make to the International Monetary Fund starting Friday, needs to break the stalemate if it's to stay afloat and effectively secure its position among the 19 countries that use the euro.
Prime Minister Alexis Tsipras failed to break the deadlock in Brussels at a late-night meeting with Jean-Claude Juncker, the president of the European Union's executive arm. That disappointed investors across Europe, with the main Athens stock market unsurprisingly bearing the brunt of the selling, closing down 1.3 per cent.
Tsipras noted progress had been made on the scale of the budget surplus that Athens has to meet —effectively the lower the surplus the country has to post the less draconian the budget measures have to be. But he said lingering disagreements over other key issues, such as proposed sales tax hikes and pension cuts, mean that an agreement is not ready.
The Greek government, elected in January on a promise to end the hated-austerity that creditors have demanded in return for bailout cash over the past five years, needs the release of a remaining 7.2 billion euros ($8.2 billion) to pay upcoming big summer debt payments. To access the money it needs creditors to agree to an economic program.
Greek Finance Minister Yanis Varoufakis said he was "certain" a deal would be struck in the near future and insisted that Greece always aims to repay its debts. And
Greece has a little more than 300 million euros to pay to the IMF on Friday. In total it has around 1.6 billion euros of payments to make to the IMF this month.
And Christine Lagarde, the IMF's managing director, said she was confident that Greece would meet its commitments and cited Tsipras' quip to questions over Friday's payment — "don't worry about it," he said.
Lagarde also said Greece's creditors, including the IMF, were showing "significant flexibility" and would do what was necessary to "soften the consequences" of necessary reforms.
As well as grappling with international creditors, Tsipras has to contend with increasingly agitated members of his Syriza party. For them, any measures they think will hurt ordinary Greeks and weaken an already battered economy represent a betrayal of the mandate given in January's election.
"If the government accepted this proposal, it would have been a disorderly retreat and an agreement to our submission," Social Security Minister Dimitris Stratoulis told Parliament.
"The entire package of proposals that were submitted (by creditors) yesterday are rejectable by our government," he said, describing them as an attempt by bailout lenders to impose "neo-colonialism."
Syriza party secretary Tassos Koronakis described the latest proposals by lenders as "a neoliberal shock tactic" that could not form the basis of an agreement.
"A proposal that describes measures of extreme austerity ... shows no respect for the mandate of the Greek people," he told private Star television.
There's also aghast that Greece's creditors haven't made an offer to reduce the size of Greece's debt burden, which stands at around 180 per cent of the country's annual national income, way more than any other country in the eurozone. Extending the date when the loans have to be repaid or cutting the interest rates due on those loans could help the country's recovery make up ground lost during its brutal recession that saw the economy shrink by around a quarter and unemployment and poverty rates sky-rocket.
At an emergency meeting Thursday with ministers, Tsipras called a parliamentary debate for Friday on the course of the bailout negotiations.
Syriza governs in a coalition with the right-wing Independent Greeks. The coalition has a majority of 12 seats in the 300-member Greek parliament. The growing dissent in his party has fueled talk of another snap election.
Tsipras is now effectively leading Greece's talks with creditors and is set to meet "in the coming days" with Juncker and Jeroen Dijsselbloem, according to EU Commission spokesman Margaritis Schinas.
The prevailing view in financial markets, despite the day-to-day swings, is that a deal will be secured in time, partly because of the uncertainty a Greek exit from the euro could cause.
AP Writer Lorne Cook in Brussels and Paul Wiseman in Washington contributed to this report.
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