Greece submits 2-year aid plan to creditors at 11th hour

BRUSSELS — Greece yesterday submitted to its international creditors a new two-year aid proposal calling for debt restructuring, the office of Greek Prime Minister Alexis Tsipras said in a last-ditch effort by Athens to resolve an impasse with lenders hours before the beleaguered nation was set to default on its debt.

“The Greek government proposed today a two-year deal with the European Stability Mechanism to fully cover its financial needs and with parallel debt restructuring ... Greece remains at the negotiating table,” the government said. Greece also asked its creditors to extend its current bailout programme “for a short period of time” in order to avert a technical default until a new loan package is in force.

Eurogroup chair Jeroen Dijsselbloem called for a telephone conference of eurozone finance ministers to discuss the fresh proposals. The developments came after European Commission President Jean-Claude Juncker made an eleventh-hour offer to salvage a bailout deal that could keep Greece in the eurozone, with Germany warning that time had run out to extend vital credit lines to Athens.

As the clock ticked down before an international bailout package expires at midnight, Central European Time (7am today, Singapore time), Greek Finance Minister Yanis Varoufakis said the government will not make a €1.6 billion (S$2.4 billion) debt repayment to the International Monetary Fund (IMF) which also falls due at the same time. If that does not happen, IMF managing director Christine Lagarde will report to the global lender’s board that Greece is “in arrears” — the official euphemism for default, the first time that an advanced economy would have defaulted on a loan from the world’s financial backstop.

In late European trading, the key bourses in London, Germany and France were down between 0.5 per cent and 1 per cent in nervous dealings, while the euro shed 0.4 per cent to US$1.1180. Across the Atlantic, the Dow Jones Industrial Average rose 0.3 per cent in early trade.

Earlier in the day, stock markets in Asia rebounded as investors hunted for bargains after Monday’s rout in expectations that the impact of a Greek default on the region would be limited, with sentiment also boosted by the surge in Chinese equities.

Among the key bourses in Asia, China’s Shanghai Composite Index rocketed 5.5 per cent in the biggest rally in more than six years, after the Ministry of Finance said it may allow the nation’s pension fund to invest in equities. Hong Kong’s Hang Seng Index rose 1.1 per cent while Japan’s Nikkei-225 Index gained 0.6 per cent.

Singapore’s Straits Times Index gained 1.1 per cent to recover most of Monday’s losses, which saw the benchmark close at its lowest this year.

“The direct impact of a collapse of the Greek economy is not significant, even in the eurozone. The ECB and EU are also likely to take steps necessary to safeguard the eurozone financial system in the coming weeks. Markets have hence not shown great panic with credit spreads widening only slightly in the eurozone periphery,” Singapore Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam said at the Association of Banks in Singapore’s annual dinner yesterday.

Despite the latest proposals, prospects of a breakthrough were dampened by a cool response from German Chancellor Angela Merkel. “This evening at exactly midnight central European time, the programme expires. And I am not aware of any real indications of anything else,” she said yesterday.

The last-ditch efforts came as uncertainty built ahead of Sunday’s referendum, with European leaders warning it would effectively be a choice between remaining in the euro or reverting to the drachma, even though the European Union has no legal way of forcing a member state to leave the single currency.

Opinion polls show Greeks in favour of holding on to the euro, but a rally of tens of thousands of anti-austerity protestors in Athens on Monday highlighted the defiance many in Greece feel about being pushed into a corner by the lenders. Mr Tsipras broke off negotiations with the Commission, the IMF and the European Central Bank and announced the referendum on the bailout early on Saturday, giving voters only one week to debate the fundamental issues at stake.

Already, the imposition of capital controls to prevent the crippled banking system from collapsing have given Greeks a bitter foretaste of the economic plunge that could follow an exit from the euro. Withdrawal limits of €60 a day have been fixed for cash machines and there have been long queues at petrol stations and in supermarkets as worried shoppers have stocked up on essentials such as pasta and rice. AGENCIES