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Hopes Low Over Greece Bailout

  • Associated Press

Greek Finance Minister Yanis Varoufakis talks to International Monetary Fund (IMF) Managing Director Christine Lagarde (R) during a euro zone finance ministers meeting in Luxembourg, June 18, 2015.

Greek Finance Minister Yanis Varoufakis talks to International Monetary Fund (IMF) Managing Director Christine Lagarde (R) during a euro zone finance ministers meeting in Luxembourg, June 18, 2015.

Optimism was in short supply over the prospects of a deal Thursday that might prevent Greece's bankruptcy, as officials headed into a keenly awaited meeting of eurozone finance ministers.

With Greece fast approaching a potential default on June 30 and amid signs that Greeks are withdrawing money from their banks, officials acknowledged that a Greek exit from the euro was now being discussed by some.

Jeroen Dijsselbloem, the eurozone's top official, was pessimistic about the meeting and insisted Greece has to take "further steps'' for a deal to emerge.

"We will not have a deal if it's not a credible deal,'' he said while arriving at the meeting. "It needs to hold up in the coming years to be credible.''

Greek Finance Minister Yanis Varoufakis declined to specify whether he would present fresh proposals to break the impasse, but said hoped that his "ideas'' would meet favor with his peers.

"The purpose is to replace costly discord with effective consensus,'' he said.

Greece's radical left-led government has been locked in discussions with its international creditors since its election in January over what economic reforms and budget cuts it needs to make to get the remaining 7.2 billion euros ($8.2 billion) available in its bailout fund. It needs the money to pay upcoming debts — first and foremost 1.6 billion euros due to the International Monetary Fund at the end of the month.

The Greek government wants an end to the budget austerity measures that have accompanied the country's bailout loans for five years. It has also been seeking some sort of restructuring of the country's sky-high debt burden, which stands at near 180 percent of annual GDP. That could take the form of lower interest rates on the debt or extending the date by which the debts have to be repaid.

Dijsselbloem said the eurozone remains by its 2012 commitment to "consider further measures and assistance'' for Greece, but only if Greece meets all its reform promises.

The blame game over the impasse in Greece's talks has gotten louder in recent days, with both sides claiming they've gone a long way to secure a deal. Greece has been adamant it won't back any deal that cuts pensions while European officials say they've made compromises by, for example, dropping a budget surplus target from 3 percent of GDP to 1 percent this year.

The stalemate has become an increasing concern across financial markets as investors fret about the potential implications of a Greek default and exit from the euro. The Bank of Greece warned its own government on Wednesday to get a deal done quickly, or Greece would face an "uncontrollable crisis'' that might jeopardize the country's membership in the European Union.

Greek shares were down modestly Thursday, with the main Athens index recovering some ground from earlier to trade only 0.3 percent lower. The Stoxx 50 index of leading European shares, meanwhile, was down 0.6 percent.

Pierre Moscovici, the European Union's top economy official, said he hoped everyone turns up "with cool heads and the political will to succeed.'' Reiterating that the EU's executive arm will do what it can to get a deal, he acknowledged that talk of a Greek exit from the euro was being discussed by some.

"The stakes are extremely high for the Greek people and all of Europe,'' he said in Luxembourg.

French Finance Minister Michel Sapin said the "differences can be overcome'' and that "the differences are not as great as people say.''

While Europe's finance ministers were preparing for their discussions, Greek Prime Minister Alexis Tsipras was traveling to Russia to meet President Vladimir Putin — a visit that has prompted speculation Greece could be seeking Russian loans.

Asked whether Russia is going to offer Tsipras money, Russian Deputy Prime Minister Arkady Dvorkovich said he "cannot comment on specific decisions.''

Hours ahead of the eurozone meeting, German Chancellor Angela Merkel pressed Greece to deliver on commitments to carry out reforms, saying it's up to leaders in Athens to show the will to reach a deal.

Merkel, whose country is a key supplier of rescue loans and Europe's biggest economy, said Greece's government in February ``committed itself to comprehensive structural reforms. These must now be tackled with determination.''

"Germany's efforts are directed to Greece remaining in the eurozone,'' she stressed. She reiterated that "where there's a will, there's a way — if the political leaders in Greece show this will an agreement .... is still possible.''

Merkel said "Greece has enjoyed an unprecedented amount of European solidarity in the last five years.'' Since Greece was locked out of international bond markets in the spring of 2010, it has relied on bailout funds from its partners in the eurozone and the IMF. In return for the 240 billion euros in loans, the country has had to make deep spending cuts and tax increases as well as economic reforms.

Tsipras' Syriza party was elected on a promise to end such austerity, which it blames for the calamitous state of the Greek economy. Barring a modest recovery in 2014, the Greek economy has shrunk by a quarter since its financial crisis began, while unemployment and poverty have increased dramatically.