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Thursday 11 June 2015

IMF breaks off negotiations with Greece over debt deal. Bundesbank president warns over rising insolvency risk

The International Monetary Fund has dramatically raised the stakes in Greece's stalled debt talks, announcing that its delegation had broken off negotiations in Brussels and flown home because of major differences with Athens.

The surprise IMF announcement came as the European Union told leftist Greek Prime Minister Alexis Tsipras to stop gambling with his cash-strapped country's future and take crucial decisions needed to avert a devastating default.

A Greek source said the entire Greek delegation that had been negotiating a cash-for-reform deal had left Brussels for home, citing outstanding disagreements.


"There are major differences between us in most key areas," IMF spokesman Gerry Rice told reporters in Washington. "There has been no progress in narrowing these differences recently and thus we are well away from an agreement."

Greece needs a deal to unlock aid before the end of the month when it is otherwise set to default on a €1.6bn repayment to the Washington-based IMF.

That could trigger capital controls and possibly send Greece hurtling towards an exit from the euro zone, with unpredictable consequences for financial markets and the European economy.

Mr Rice said the key sticking points remained pensions, taxes and financing.

He added the IMF technical team had returned to the US but remained "fully engaged" with Athens.

The Greek government has said it would "intensify" efforts to resolve differences with its creditors.

"The Greek delegation, as agreed, is ready to intensify its negotiations" to reach an accord, "including in the next 24 hours" and will "continue to work on the unresolved questions", in particular regarding the budget and debt, said government spokesman Gabriel Sakellaridis.

Earlier, European Council President Donald Tusk spelled out an unprecedentedly forthright message to Greece's radical anti-austerity government after four months of bitter negotiations.


"There is no more time for gambling. The day is coming, I'm afraid, that someone says that the game is over," he told a news conference after chairing an EU-Latin America summit that was dominated by intense talks with Mr Tsipras on the sidelines.

"It is very obvious that we need decisions, not negotiations," Tusk said, adding that Athens needed to be "more realistic."

Mr Tsipras held two hours of talks with European Commission President Jean-Claude Juncker, but neither side reported any breakthrough. "Come in the torture room," Mr Juncker told Mr Tsipras at the start of their meeting.

EU officials later described the talks as a "last attempt" to reach a debt deal.

Asked about concerns for the process raised by the departure of IMF and Greek negotiators, an EU diplomat said: "If the process was working properly the president would not have had to have a meeting with Tsipras today."

Mr Tsipras told reporters he had worked on bridging the remaining differences on fiscal and financing issues.

"We are working to assure an agreement which will ensure that Greece will recover with social cohesion and viable public debts," he said.

  • Bundesbank president warns over rising insolvency risk

The president of Germany's Bundesbank has warned the risk of Greece becoming insolvent is rising by the day.

Speaking in London, Jens Weidmann said "there is a strong determination to help Greece," but added "time is running out, and the risk of insolvency is increasing by the day."

A Greek exit would call into question the euro membership of other indebted countries such as Italy and Spain, but Mr Weidmann argued it was Greece itself that would stand to lose most from leaving the bloc.

"The contagion effects of such a scenario are certainly better contained than they were in the past, though they should not be underestimated," Mr Weidmann, who also sits on the European Central Bank's decision-making Governing Council, said.

"But the main losers in that scenario would be Greece and the Greek people."

   http://www.rte.ie/news/2015/0611/707313-greece/
11/6/15
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