Greece seeks new loan deal with EU in race to avoid collapse

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STRASBOURG/BRUSSELS (Reuters) – The race to rescue Greece from bankruptcy and keep it in the euro accelerated on Wednesday when Athens formally applied for a three-year loan and European authorities launched an accelerated review of Requirement.

Greek Prime Minister Alexis Tsipras called in a speech to the European Parliament for a fair deal, acknowledging Greece’s historic responsibility for its fate, after European leaders gave it five days to propose convincing reforms.

The government has submitted a request to the European Stability Mechanism bailout fund to lend an unspecified amount “to meet Greece’s debt obligations and ensure the stability of the financial system”. He promised to start implementing the tax and pension measures demanded by creditors as early as Monday.

With its banks closed, cash withdrawals rationed and economy in freefall, Greece has never been closer to a state bankruptcy that would likely force it to quit the euro and print an alternative currency. .

Yet the left-leaning prime minister sounded almost nonchalant, albeit with a note of humility, as he appeared before EU lawmakers in Strasbourg to scattered cheers and boos.

Speaking hours after euro zone leaders at another emergency summit in Brussels set Greece a deadline of the end of the week to present sweeping reform proposals, Tsipras said the Greeks had no choice but to demand a way out of “this impasse”. ”.

“We are determined not to clash with Europe but to take on the establishment head-on in our own country and change the mindset that will bring us and the Eurozone down,” he said. he declared to applause from the left. But he gave few details about his reform plans, frustrating many lawmakers.

The head of the Eurogroup of finance ministers from the 19-nation monetary zone, Jeroen Dijsselbloem, has asked the European Commission and the European Central Bank to assess the loan request, assess the sustainability of Greek debt and to study whether Greece poses a risk to the financial stability of the euro zone.

IMF chief Christine Lagarde reiterated that Greece’s massive debt would need to be restructured, something Germany is resisting. “Greece is in an acute crisis situation, which needs to be addressed seriously and quickly,” she told the Brookings Institution think tank in Washington.

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EMERGENCY FUNDING

The aim is for Eurogroup ministers meeting on Saturday to be able to recommend an emergency bridging loan and funding, which a full summit of 28 European leaders would approve on Sunday if they are satisfied with Greek reform commitments.

That’s a big “if”, both because of Athens’ checkered record and because many of the liberalization measures required run counter to the left-wing ideology of Tsipras’ Syriza party.

The Prime Minister promised to present detailed reform plans on Thursday and avoided angry rhetoric that has alienated many European partners. He, however, criticized attempts to “terrorize” Greeks into voting for “endless austerity”.

The European Central Bank has kept Greek banks on a leash, freezing emergency funding, meaning they could soon run out of cash. The Greek government has said banks will remain closed until July 13, with an ATM withdrawal limit unchanged at 60 euros per day.

European Council President Donald Tusk reiterated that the final deadline for Greece to submit convincing reform plans and start implementing them was this week.

“Our failure to reach an agreement could lead to the bankruptcy of Greece and the insolvency of its banking system,” Tusk told European lawmakers. “And that will certainly be the most painful for the Greek people.

“I have no doubt that this will affect Europe, also in a geopolitical sense. If anyone has the slightest illusion that it won’t, they are naïve,” he said.

In the turbulent chamber, some lawmakers waved ‘Oxi’ (No) signs in support of Greek voters’ rejection of more austerity, while far-right speakers praised the hard-left government for resisting what what many have called the European “oligarchy”.

Eurozone officials want Greece to rush a first wave of measures through parliament before Sunday to prove its serious intent. German Chancellor Angela Merkel said she would ask the Berlin parliament to authorize the opening of loan negotiations if the Greek measures are deemed satisfactory.

Merkel made it clear earlier that she was “not overly optimistic” that a deal could be found to save Greece by Sunday.

Eurozone sources said a key question was whether the package will be more ambitious than the spending cuts, tax increases and modest reforms that Greek voters rejected on Sunday in a referendum on a previous rescue plan.

“The numbers have to add up, and the numbers have gotten much worse since the banks closed and the economy seized up over the past 10 days,” a euro zone finance official said.

“ADVOCADO OF IMPOTENCE”

France, which attempted mediation between Athens and Berlin, nailed its colors to the mast on Wednesday, warning of the perils of a “Grexit”.

Socialist Prime Minister Manuel Valls told Parliament in Paris: “Keeping Greece in the euro and therefore at the heart of Europe and the EU is something of the utmost geostrategic and geopolitical importance. Letting Greece go would be “an admission of helplessness”, he added.

Despite last-minute efforts to discuss a deal, a Reuters poll of economists found the likelihood of Greece leaving the eurozone had risen to 55% from 45% last week, the first time it was judged. more likely than not.

Tsipras admitted that after taking power on a promise to end austerity, his government had ‘spent more time negotiating than governing’, but disappointed those who had hoped to hear immediate concrete action to transform the broken economy.

Having secured a victory in the referendum and unprecedented support from the five main parties in parliament, Tsipras has also made it clear that he wants to act quickly to head off any potential uprisings over the painful concessions he will have to make.

He strongly criticized Greece’s failures as a society, citing a history of clientelism, corruption, tax evasion that had “degenerated”, inequality and “the nexus between political and economic power”.

While Athens has made progress since 2010 in restoring its public finances to post a budget surplus before debt service, it has lagged in the implementation of structural reforms.

In particular, it is far from achieving goals to privatize state assets and has struggled to improve tax collection and reform labor laws and an expensive pension system.

Centrist European lawmaker Sylvie Goulard told Tsipras: “To use the words of a well-known advertising slogan, ‘Just do it!'”

Additional reporting by Renee Maltezou, Foo Yun Chee, Robert-Jan Bartunek, Alastair Macdonald and Tom Koerkemeier in Brussels, Susanna Twidale in Strasbourg, Deepa Babington in Athens, Madeline Chambers in Berlin and Anna Yukhananov in Washington; Ross Finlay in London and Jason Lange and Douwe Miedema in Washington; Written by Paul Taylor; Editing by Giles Elgood and Andrew Heavens

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