Greek finance minister Yanis Varoufakis sees no reason his country and its creditors will not get a deal at Saturday’s meeting of eurozone finance ministers.

Varoufakis, who said earlier that Greece was determined to stay in the eurozone but that Athens would not sign an agreement with lenders that it considered “unviable”, is quoted in a series of alerts on Reuters this evening:

• 26-Jun-2015 18:16:41 - GREEK FINANCE MINISTER VAROUFAKIS SAYS SATURDAY’S EUROGROUP WILL TRY TO CONVERGE ON A DEAL THAT INCLUDES DEBT, FUNDING

• 26-Jun-2015 18:17:50 - GREEK FINMIN SAYS GREECE HAS MADE CONCESSIONS, ATHENS REJECTS 5-MONTH FUNDING PROPOSAL FROM LENDERS

• 26-Jun-2015 18:22:22 - VAROUFAKIS SAYS GREECE PROPOSED THAT ESM RESCUE FUND COULD TAKE OVER GREEK DEBT HELD BY ECB

• 26-Jun-2015 18:25:26 - GREEK FINANCE MINISTER SAYS WON’T DENY GREEK PROPOSAL CONTAINS RECESSIONARY MEASURES BUT THEY ARE AIMED AT HIGHER INCOMES

• 26-Jun-2015 18:30:10 - GREECE’S VAROUFAKIS SAYS LENDERS REVERTED TO TOUGHER DEMANDS, SIX EUROGROUP MINISTERS SAID CREDITORS’ PROPOSAL WAS TOO SOFT ON GREECE

• 26-Jun-2015 18:39:47 - GREECE’S VAROUFAKIS SAYS SEES NO REASON WE WILL NOT HAVE A DEAL ON SATURDAY

Our reporter Jon Henley is in Syntagma square where communist party supporters have gathered to protest against the demands for more austerity by creditors.

Tsipras’s impossible dilemma

Veteran political commentator Yannis Pretenderis says not since the return of democracy in 1974, following the collapse of military rule, has Greece faced such a critical moment.

Speaking on Mega TV’s flagship news programme, Pretenderis said the Greek prime minister Alexis Tsipras was facing an almost “impossible dilemma.”

“Either he accepts a deal that is financially very, very hard, with extraordinarily painful measures, or he accepts bankruptcy, catastrophe. It is an almost impossible dilemma, one that no-one would want to face and honestly, right now, I have no idea which way we will go. It will be hard to sleep well tonight.”

Helena reports that the Greek prime minister has just arrived, in a black sedan, straight from the airport to host that emergency cabinet meeting, as trailed earlier.

Over in Athens protesting communist party supporters have poured into Syntagma square, reports Helena Smith.

As I write thousands of communist party protestors have taken to the streets to protest against the demands for more austerity by creditors. Their rallying cry: “no to the new agreement, rupture with lenders.”

The KKE communist party has released a statement saying:

“We have paid enough for the blackmail and mockery between the government and lenders. Let there be rupture with the European Union, capital and their power.”

If you were wondering what UK prime minister David Cameron thinks should happen, then turn to this story from my colleagues on a leaked diplomatic document.

Alberto Nardelli and Nicholas Watt report that Cameron told a fellow EU leader that it “might be better” for Greece to withdraw from the eurozone to allow it to fix its economy, according to the document.

They write:

As eurozone finance ministers prepare to hold an emergency meeting on Saturday on the Greek crisis, the document suggests that the British prime minister believes a Greek exit may be the best option, though he acknowledged it would carry “major risks”.

The note, a leaked account of a private discussion between the prime minister and one of his European counterparts about his EU reform demands, indicates that Cameron made his remarks in an informal part of the meeting.

The note says: “On Greece, the PM wondered if it was wise for Angela Merkel to allow the discussion with Greece to take place at PM level and mused that it might be better for Greece to leave the eurozone in order to sort its economy out – though also accepted that there were major risks in that too.”

Read the full story:

Meanwhile, back in Athens, an emergency cabinet meeting is due to start shortly at the prime minister’s office, the Megaro Maximou.

Ministers are already arriving to attend the meeting, reports Helena Smith. The Greek prime minister Alexis Tsipras has yet to appear but is about to land in Athens from Brussels.

As labour minister Panos Skourletis told Helena earlier, the entire government was asked to be on standby after Tsipras rejected a proposed bailout extension from Greece’s creditors.

Looking beyond Tuesday’s IMF payment deadline, economists at Citi have put out a handy chart of some key dates for Greece.

Under the headline “Are We There Yet?” the investment bank’s economists write that they are still expecting an interim deal:

An ‘interim’ deal remains our baseline — We still believe that an agreement to extend the current aid programme (for up to six months) is likely to be found soon as modest concessions from both sides appear achievable. But we acknowledge increasing risks that the process could take us beyond the June 30 deadline, which would likely result in the imposition of capital controls, after an IMF default.

But they highlight rising politicial risks on several fronts:

i) failure to pass the package in parliament, ii) failure to implement ‘prior actions’, iii) increasing social tensions, iv) deepening splits within Syriza leading to a possible government collapse and early elections.”

• This post was amended on 18 February 2019 following a complaint from Citigroup Inc.
  

The Greek government has just produced one of its famous non-papers, this time a seven-point one, explaining why it cannot accept the proposal by creditors to extend the country’s current bailout programme until November, reports Helena Smith in Athens.

It states:

“The proposal by the institutions to the Greek government entailed immediate legislation of deep recessionary measures [which would hurt the already wounded social fabric of the country] as a pre-condition of five months of financing, which anyway, was judged to be wholly inadequate.”

“If this proposal had been accepted by the government and parliament, people and markets would have faced another five months of further shrinkage which would have lead to yet another negotiation under conditions of crisis. That is one of the reasons why the institutions’ proposal cannot be accepted.”

Prolongation of the current bailout programme would have led “with mathematical precision” to a new round of tough negotiations and a new, catastrophic memorandum [rescue programme] at the end of the year, it said.

“The government does not have a popular mandate, nor the moral right, to sign up to a new memorandum,” said the announcement.

Here is more from Reuters reporting an EU official saying chances of a deal at Saturday’s crunch meeting are more than 50%.

Its correspondents in Brussels write:

The EU official, who asked not to be named because of the sensitivity of the talks, said despite the hardline position of most eurozone finance ministers, EU leaders expressed the political will at a summit in Brussels to take half a step towards Greece.

The chances of a deal on Saturday, when eurozone finance ministers meet at 1200 GMT were better than 50%, the official said, although it was less certain if the Greek parliament would endorse an agreement struck by the government.

To facilitate a deal, the creditors could restate a November 2012 pledge by euro zone finance ministers to help make Greek public debt sustainable by extending loan maturities and a moratorium on interest payments and lowering interest rates.

If Greece were to accept the offer with some small new concessions to accommodate Athens’ views, the country could then count on financing for the next five months -- until the end of November -- thanks to a bailout exension.

Full story here.

As the Greek prime minister Alexis Tsipras heads back to Athens from Brussels, voices of dissent are growing in his far left Syriza party, reports Helena Smith.

The time has come to say the “big no”, the Syriza MP Yannis Micheloyiannakis said, praising the Greek leader’s rejection of the lenders’ offer to prolong Greece’s current bailout programme until November.

“There is no bigger mistake than accepting an extension until November in exchange for the blood of measures and our own money,” the MP said in an announcement.

“It would be humiliating, and at the same time tantamount to acceptance of the course towards a third memorandum [bailout accord] in November. Now is the time to say the big no.”

As the Greek crisis hurtles towards another big deadline, our reporter Jon Henley [not our Southern Europe Editor John Hooper, as previously reported - with apologies to both] has been considering the role of IMF head Christine Lagarde and what could well be a career-defining few days for the Frenchwoman.

Jon writes:

By turns business-like and ineffably charming, straight-talking and surprisingly funny, Lagarde’s unusual mix of Gallic charm and Anglo-Saxon effectiveness is undoubtedly better appreciated in international circles than in France. The next few days could make or break her reputation.

The full profile is here:

Helena reports that the deputy social security minister Dimitris Stratoulis has also levelled an excoriating critique of the lenders’ latest proposal.

The creditors’ latest offer amounted to “the ultimate demolition” of the welfare state and “total misery and impoverishment” of those already on very low pensions, he said.

The ruling Syriza party had decided to take action.

“[We] will erect a wall against the brazen claims of creditors who seek the complete humiliation of the left government and [whose actions will] lead to the enslavement and extermination of [our] people.”

Is this the “final deadline”, ask economists at Morgan Stanley. Either way, they are downbeat about the chances of this weekend coming up with a deal that amounts to a long-term resolution of the Greek debt crisis.

Writing in their weekly research note, they comment:

Even though the economic incentive is to secure a deal, the political incentive may get in the way, especially given a very tight deadline. The damage to mutual trust between debtor and creditors that the negotiations have produced is quite substantial, in our view.

That’s why, even if there’s an 11th hour resolution, the chances are that it will mostly provide short-term financing to the Greek sovereign against strong monitoring of whether the creditors’ demands truly are implemented. With Greece likely to struggle on this front, any agreement over the next several days – while positive for sentiment – is likely to postpone the next bout of political volatility a few months down the road, until a more visible shift in Greece’s domestic policies comes into play.

Helena Smith in Athens will have more shortly on Greece’s move to reject a proposed bailout extentions. In the meantime, a quick refresher on what’s on the table in these cash-for-reforms talks. The main sticking points have been pensions followed by VAT and other taxes. This lays out the main issues:

Government sources are also quoted as saying that the lenders’ latest proposal is simply unviable - and the rescue funds offered (€15.5bn) are insufficient to cover Greece’s financing needs, reports Helena.

“No financing solution could work in the context of the proposal of the institutions,” one said.

The same sources - reflecting similar statements made by senior officials in the governing Syriza party earlier today - said “many scenarios” were now being considered.

What was important, the sources said, was that an agreement did not “recycle” the vicious cycle of austerity.

If you are just joining us and wondering what is happening tomorrow and why it matters for Greece, for the eurozone and beyond, we have just published this Q&A on the Eurogroup meeting.

As EU policymakers have been stressing, time really does appear to be running out for Greece and its creditors to reach a deal. Then again, we have been here a few times before and already today there has been talk of extending Greece’s bailout again.

Saturday’s Eurogroup meeting has been brought forward by three hours to 2pm Brussels time (1pm BST).

The Greek stock market is now up 1.1%. Germany’s Dax and France’s Cac have reversed earlier falls are now trading 0.3% and 0.8% higher, respectively.

The FTSE 100 index in London is still 0.45% lower, however.

US Treasury Secretary Jack Lew has been sharing his thoughts on the Greek crisis in an interview with Yahoo published today.

Lew said on Greece:

I hope they take this weekend seriously. The thing about the conversations around Greece that have been of concern to me is the number of deadlines, the number of times it’s gotten right to the edge.”

“The risk of an accident goes up the more times you have these [situations, and] everyone rushes to a deadline. I hope they can reach an agreement that prevents Greece from going through the deep pain that a breakdown would cause, and it doesn’t create risks to either the European or the global economy. This is not the time for a shock.”

News that the EU and IMF are now contemplating prolonging the country’s bailout programme by another five months will land with the force of a bombshell in Athens, our correspondent Helena Smith reports.

There are few who will welcome this news. Kicking the can that is the great Greek debt crisis down the road will not only fail to staunch the political uncertainty that has plagued the country, but have potentially devastating effects for the economy.

The prominent political analyst Aristides Hatzis told the Guardian:

It will be a major defeat for the government which has pushed for a comprehensive deal that could alleviate, once and for all, the negative consequences of this ongoing nightmare.

Now we have another case of ‘extend and pretend’ which has been at the root of the saga for the last five years. It is like a bad soap opera.”

The leftist-led government had wanted a deal that would at least guarantee financing until the end of 2016 – what Euclid Tsakalotos described in an interview for this blog as a “mid-term solution” that would quash scenarios of Grexit, reignite investor interest in Greece and give the economy the time and space to economically recover. “A short-term solution would be the worst of all,” he told me.

The news was quick to send shudders through the financial sector.

“We will rot inside the euro zone,” one banker said requesting anonymity. “Nobody wants this solution, it just prolongs the Greek drama.”

Germany’s Angela Merkel has been giving a press conference in Brussels where Reuters quotes her as saying:

We have taken a step towards Greece... Now it is up to the Greek side to take a similar step.”

German chancellor Angela Merkel has been again emphasising the make-or-break nature of this weekend’s Eurogroup meeting, saying there are no plans to follow it up with a eurozone leaders summit.

Reuters reports Merkel saying she and her French counterpart François Hollande have urged Greek PM Alexis Tsipras to accept the “generous offer” from creditors and that after concessions from their side it is now up to Greece to take a step in the direction of its eurozone partners.

The final countdown: the fixed income research team at Deutsche Bank says:

We continue to believe the most likely outcome is a deal that keeps Greece in the euro area. Time is running extremely short and the risk of accident rises as a consequence. One cannot rule out scenarios such as non-payment plus capital controls or even pre-emptive capital controls. A referendum may be called. The additional stress created through these scenarios may yet be required to create the political consensus to close the deal.

Higher uncertainty is a risk but contagion should be more limited than it was 3-4 years ago. Financial institutions have markedly less exposure to Greece. Other peripherals have adjusted and are running current account surpluses. Their reliance of foreign investors has declined and private capital in these countries has been stable this year despite the exodus from Greece. Correlation between activity conditions in Greece and the rest of the euro area is down too and we are confident the ECB would if necessary act to reinforce its “whatever it takes” reputation.

A Staff Level Agreement is no panacea either. It depends on the details. If a recovery is heavily penalized by tough austerity, the fiscal adjustment risks being self-defeating. Not only might the fiscal targets prove elusive, but austerity and recession may push political support even further into the extremes, questioning the commitment to implementing the necessary reforms and hence the recovery in jobs and investment.

Turning to Brexit: Schäuble also wants the UK to stay in the European Union.

German finance minister Wolfgang Schäuble is speaking now. It’s the usual hard talk. According to Reuters, he said the Greek economy cannot grow without sustainable public finances and if we kick the can down the road, the situation will just get worse. He criticised the Greek proposals for simply increasing taxes, without spending cuts. Greece is well aware of the benefits of staying in the euro, he said, and warned that if markets lose confidence in policymakers, the euro will fall apart.

Over in Athens, Helena Smith reports that Greece has persistently called for a solution to be found at a higher, political level - so in effect the German chancellor has now quashed Tsipras’ demand – returning the ball to the court of eurozone finance ministers.

Merkel’s cold shoulder is bound to further rile the Greek government following leaks that what is also being discussed is an extension of Greece’s €240bn bailout programme and not a new comprehensive deal as Athens had wanted.

A German finance ministry spokesman said the German negotiating team is heading to Brussels on Saturday with the goal of reaching a deal – and the ultimate goal is to keep Greece in the euro. “We are discussing a comprehensive package,” said ministry spokesman Martin Jäger.

Greece’s international creditors have made compromises in talks with Athens and it is now up to the Greeks to move, he said. He also described the troika’s offer as “generous,” as reported earlier.

It is now very clear that it is up to the Greek side to make their contribution to a solution to the problem.

Only then will there be a solution: the Greek government needs to move closer to the institutions and accept their generous offer.

A German government spokeswoman said Merkel made clear that time is pressing on Greece. A deal must be struck by creditors and eurozone finance ministers, she said (thereby rejecting Greek calls for a eurozone leaders’ summit).

Over in Athens, talks between Tsipras, Merkel and Hollande have been concluded but may well continue again once the EU summit is over, Greek news outlets are reporting. Our correspondent Helena Smith reports: a government statement, issued within minutes of the three-way meeting being held in the offices of the French delegation at the European Council, said:

Alexis Tsipras informed the two leaders about the Greek proposal and emphasised that the Greek side did not understand why creditors were insisting on such hard measures. Negotiations will continue after the summit is concluded.

The talks - the third of their kind in less than a month - were arranged late last night after Athens submitted another revised package of proposed reforms running eight pages long.

Sticking points between the two remain pensions (Athens wants to raise the pension age to 67 in 2022 and not earlier) and value added tax, insiders say. The Greek government is adamant that VAT should not be increased on islands which have long been exempt from higher levies under EU treaty.

Here’s more on those private talks between Tsipras, Merkel and Hollande this morning, which lasted 45 minutes, courtesy of Reuters. A French source told the news agency:

On the substance, the gap is not so wide. They discussed what has to be done today and tomorrow to conclude on issues still to be settled relating to reforms, the extension of the programme and the question of financing.

Both Merkel and Hollande stressed that Saturday’s Eurogroup meeting was the decisive moment in the negotiations and saw no need for another eurozone leaders’ summit. If necessary, they will hold further talks with Tsipras before the finance ministers’ meeting.

While we are waiting, a German finance ministry spokesman just said the Greek government needs to “move” in Saturday’s negotiations. It is up to Greece to accept the “very generous” offer from the creditors.

Donald Tusk, president of the European Council, and Jean-Claude Juncker, president of the European Commission will be holding a press conference soon. You can watch it live here.

Tsipras, Merkel and Hollande discussed the possibility of extending Greece’s bailout programme, according to Reuters, citing a French source. They had a private meeting before the final session of the EU leaders’ summit in Brussels.

And eurozone finance ministers are due to resume discussions on Saturday at 5pm Brussels time.

In other Greek news...

Meanwhile, Greece’s interior minister, Nikos Voutsis, has also been speaking. He told private ANT1 TV station:

The outcome largely depends on the way our partner will face the Greek issue. If they insist on a clear accounting approach, then apparently pessimism will prevail, but if the European leaders understand that Greece’s problem is part of the whole picture of the European problems in which unity is a prerequisite, there will be optimism over the outcome of the negotiations.

In case of a failure to reach an agreement in the negotiations, both Greece and Europe will be found in unexplored waters.

China says it is confident about the outcome of the Greece debt talks. Vice foreign minister Wang Chao told a news conference:

We have full confidence in how that will progress. Chinia would like to see Greece remain in the eurozone and appreciates the relevant parties’ efforts in this regard.

We believe that the eurozone can, via the efforts of all parties, appropriately deal with the situation.

And while we wait for more news from Brussels, here are some more thoughts on the sharp sell-off in the Shanghai stock market. Augustin Eden at Accendo Markets says there have been too many IPOs:

Big losses on the Shanghai Composite index extend[ed] into Friday’s session following tremendous Chinese market rumblings on Thursday. A blistering bull run on the Chinese mainland looks set to end in the arena that, for the animals themselves anyway, spells imminent demise. 2015’s market mania (with the Shanghai Comp. gaining a massive150%) has seen countless funds piling into Chinese equities encouraged by vast valuations, IPOs aplenty, confidence in economic stimulus and an explosion in margin-supported trading.

There’ve been too many IPOs, lenders are freaking out (tightening margin rates as a consequence), lofty valuations are being called into question and that ever elusive stimulus remains to be rolled out in any meaningful way. It’s like rats leaving a sinking ship, and a terrible day for any investment trust dedicated entirely to long-term investments in mainland China.

Here’s Mike van Dulken again, head of research at Accendo Markets, on the likelihood of a relief rally on Monday.

Equities in the red accelerating their sell-off from late yesterday as we move into what is being billed as the last weekend for Greece to present acceptable reforms to its creditors to unlock the bailout-avoiding funds it desperately requires.

While another last-minute weekend agreement would surely mean a relief rally come Monday, continued stubbornness on both sides could equally take us into uncharted default/euro-exit territory and the accompanying uncertainty send markets lower. Gold continues to languish around $1170, failing to benefit from safe haven demand despite Greece being on the cup of default.

Helena Smith in Athens reports that Tsipras has been in talks with the German and French leaders for about 25 minutes.

Tsipras is on his way to talks with his German and French counterparts, media are reporting in Athens. Helena Smith writes:

The far left leader is on his way to the European Council, SKAI TV is reporting. Tsipras has repeatedly placed hopes in striking a deal at a higher level, bypassing euro group finance ministers who officials in Athens claim have been constantly stonewalled by Berlin’s unyielding, pro-austerity finance minister Wolfgang Schäuble.

Speaking to Skai, Stelios Koulouglou, a euro MP with the ruling Syriza party, said the Greek government was still placing hopes in a “political” deal being reached.

There is an ongoing effort to clinch an agreement at a higher political level because further down there is the faction of Schauble who blocks [resolution].

The three politicians are still in Brussels for the regular summit of European Union leaders.

The Financial Times reports EU officials are preparing plans to “ringfence” Greece if talks fail on Saturday, including capital controls.

You can listen to the Varoufakis interview on Morning Ireland here.

More thoughts on Greece. Angus Campbell, senior analyst at FxPro, says:

Another day passes with no deal on Greece and investors are likely to want to position themselves for negotiations to go on into the weekend by reducing exposure to risk assets. Indices are a little softer on the open and the euro is offered as we see yet another classic situation when it comes to the eurozone with things going down to the wire. Investors however remain optimistic that a deal will be struck ahead of next week’s IMF payment deadline throwing Greece yet another lifeline.

If the expected deal does come over the weekend then investors will not be able to react until Monday and there could be disappointment if Greece is afforded just the extension to its existing bailout which will only fund the country through the summer. The political will that has so far kept the eurozone intact is being tested more than it has ever been before and is likely to be further. It’s just a question of whether politicians and in particular Greece’s creditors have the staying power.

Whose round is it in the last chance saloon? ask Mike van Dulken and Augustin Eden at Accendo Markets.

While we might berate Greece for stringing things out, why wouldn’t it do so until the last minute? Again. It knows exactly what the other side wants and can simply agree to just in the nick of time. Again. Until then, you never know what the purse-string-holders might concede, improving the final deal. The only risk is whether Greek depositors are prepared to hold out too. If they exit en masse they could force Tsipras’ and Syriza’s hand in terms of potential financial collapse.

Bernard Aw, market strategist at trading firm IG, said the “correction” in the Shanghai stock market is healthy in the long run, and China’s central bank wants the market to be more stable.

It is probably not a bad idea to repeat my view that China’s leaders still view a strong capital market as beneficial for the Chinese economy, more importantly, a stable bull market is desired.

Meanwhile, Jasper Lawler, market analyst at CMC Markets UK, says:

German chancellor Angela Merkel has said Saturday’s Eurogroup meeting would be of “decisive importance.” Perhaps a wider concern for markets is that each day the institutions lose more credibility when these arbitrary “final” deadlines gets missed.

It doesn’t look too hopeful that an agreement will be reached on Saturday. Pensions are still a sticking point that neither side wishes to give into. That said, nobody wants to be left holding the smoking gun of Greece’s default and exit from the euro. It seems likely that another arbitrary extension date will emerge before June 30, when Greece’s current bailout runs out.

Good morning and welcome back to our coverage of the eurozone (Greece) debt crisis and other economic developments.

Following Thursday’s 24-hour negotiating marathon, European politicians will be working frantically on a deal between Greece and its international creditors, before talks between eurozone finance ministers resume on Saturday.

Billed as “last ditch” talks (yet again) these weekend discussions will be crucial, as Athens has to make a €1.6bn payment to the International Monetary Fund (IMF) on Tuesday.

Speaking after a meeting of European leaders broke up in the early hours of Friday morning, German chancellor Angela Merkel said the Saturday eurogroup meeting “will be decisive because time is of the essence”.

Every member of the European Council [EU leaders] strongly supported that every effort has to be made to bring about a solution.

Investment bank JP Morgan believes that if no deal is reached by Sunday night, banks in Greece will stay closed on Monday.