Greece Faces Euro Exit Unless Demands Accepted by Sunday

[size=47]Greece Faces Euro Exit Unless Demands Accepted by Sunday[/size]
by Nikos ChrysolorasMatthew CampbellJames G Neuger
[size=11]July 8, 2015 — 5:27 PM MYTUpdated on July 8, 2015 — 9:59 PM MYT
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European leaders talked openly about a Greek exit from the euro ahead of a weekend summit on the country’s economic future, breaking dramatically with years of denial about the possibility.
Europe has “a Grexit scenario prepared in detail,” European Commission President Jean-Claude Juncker said late Tuesday night, hours before Austrian Chancellor Werner Faymann said Greece’s Plan B is “another currency.” The European Union set a Sunday deadline to reach a deal with Greece on a rescue in exchange for austerity measures and economic reforms, while the country formally requested a new three-year bailout and promised to pay back its debts.
The continent’s most indebted country is closer than ever to being forced to abandon the euro after its people voted decisively in a July 5 referendum to reject spending cuts and tax hikes. Greece’s banks are almost out of cash and its economy is grinding to a halt after Prime Minister Alexis Tsipras imposed capital controls to stem withdrawals, and could collapse entirely without a new lifeline from the European Central Bank.

“Our inability to find agreement may lead to the bankruptcy of Greece and the insolvency of its banking system,” said EU President Donald Tusk. Failing to find a deal “will mean the end of the negotiations with all the possible consequences, including the worst-case scenario where everyone will lose,” he said.

Market reaction to the turmoil was muted. The euro climbed 0.4 percent to $1.1057 and the benchmark Stoxx 600 index rose 0.3 percent as of 3:40 p.m. in Brussels. Greek bonds dropped for a fourth day, although Italian and Spanish debt extended a rally amid hopes Greece would be able to reach a deal, or that the ECB would act to protect other markets from any fallout.

Conciliatory Tone

Sunday’s Brussels meeting now looms as the climax of a five-year battle to contain Greece’s debts, potentially splintering a currency that was meant to last and throwing more than half a century of European economic and political integration into reverse. German Chancellor Angela Merkel, whose country is Greece’s largest foreign creditor, said she is “not especially optimistic” about finding a solution.
Tsipras was in Strasbourg Wednesday as part of his last-ditch campaign to keep Greece in the euro.

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Greek PM Office

His government extended capital controls and bank closures through Friday as it sent a formal request for a new bailout to the European Stability Mechanism, the body that co-ordinates financial assistance to member states. Greece asked for a three-year loan facility, said tax and pension reforms would be implemented starting next week, and pledged to honor all its financial obligations “in a full and timely manner.”
The letter, signed by new finance minister Euclid Tsakalotos, was more conciliatory than the previous Greek request, which asked explicitly for debt relief and didn’t commit to reforms. Today’s document supersedes the earlier one.