BRUSSELS: Greece’s creditors saw a ray of hope on Monday as Prime Minister Alexis Tsipras went into an emergency eurozone summit aimed at finding a deal to save Athens from default and a possible exit from the euro.
The European Commission said eleventh-hour reform proposals submitted by Tsipras Sunday night were a “good basis for progress” while France said that “quality work” had been done to end five months of deadlock.
Greece’s new offer is the last chance for Athens to avoid defaulting on a 1.6-billion-euro IMF payment on June 30 and prevent it from crashing out of the single currency and possibly the EU, with potentially dire effects on the world economy.
European stock markets surged early on Monday on belief that Greece would make the deal, with Athens soaring by 7.6 percent. The DAX 30 in Frankfurt was up 3.5 percent shortly after the open.
The optimism came despite fears of a run on Greek banks, with officials at the European Central Bank again deciding to inject more emergency funding into the cash-strapped country to cover withdrawals of cash by worried depositors.
EU President Donald Tusk has called an emergency eurozone summit for Monday evening. Eurozone finance ministers will meet earlier in the day and Tsipras will also have bilateral meetings with key figures.
European Commission chief Jean-Claude Juncker’s cabinet chief Martin Selmayr said the Athens proposal offered “a good basis for progress,” although in a sign of the difficulties involved he described the negotiations as a “forceps delivery.”
“I see the work that has been done. It is quality work,” French Finance Michel Sapin told French radio, adding that the negotiations were proceeding in “good conditions.”
“They go in the right direction and lay the ground for a deal, which means there is still need for discussion,” said Pierre Moscovici, the EU’s Economic Affairs Commissioner.
“I think the Greek government has finally understood that it had to send concrete and solid counter-proposals,” he added.
Discussions between Greece’s radical-left government and its lenders have been stalled by disagreements over the reforms demanded in exchange for the final 7.2 billion euro tranche of the bailout.
The meeting at the highest possible level to decide the fate of Greece has been a demand of leftist-led Athens, which has resisted cutting a deal with ministers and technocrats despite the insistence by its Europeans partners it do so.
Tsipras is due Monday sit down with Mario Draghi, the head of the ECB, and Christine Lagarde, the head of the IMF, the Washington-based creditor that has taken the toughest line against Greece.
It is not clear what concessions have been offered by either side but Tsipras detailed what his office called a “mutually beneficial deal” in a phone call on Sunday with German Chancellor Angela Merkel, French President Francois Hollande and European Commission President Jean-Claude Juncker.
Failing a deal, Greece is likely to default on the IMF payment of around 1.6 billion euros ($1.7 billion), setting up a potentially chaotic “Grexit” from the eurozone.
The IMF was called in to help rescue Greece at the end of 2009 when the debt-plagued country could no longer borrow on international markets.
The EU’s involvement in the huge bailout, which was to provide 240 billion euros ($270 billion) in loans in exchange for drastic austerity measures and reforms, runs out at the end of this month, but IMF support was supposed to continue to March 2016.
For the Greek government, any extension of the bailout should be about kickstarting the country’s devastated economy and not imposing further austerity.
They also want an easing of the country’s crippling debt burden, which officially stood at 312.7 billion euros, or nearly 175 percent of total annual economic output, in March.
‘No clean-cut proposals’
The creditors have rejected a series of proposals from Athens, insisting on their own mixture of cuts and reforms, especially of Greece’s pension system—a no-go area for the government.
Shinya Harui, a Europe-focused financial markets analyst at Nomura Securities in Tokyo said that despite the optimism on the financial markets, it was difficult to forecast the summit outcome.
“[Greece] is unlikely to have presented clean-cut proposals that meet creditors’ demands but they are likely to claim they have made enough concessions and it is creditors who are blocking a deal,” he told Agence France-Presse.
“They are probably still trying to negotiate at their own pace.”