EU’s Tusk says good agreement on Greece should convince parliaments

The government of Greek Prime Minister Alexis Tsipras drafted a new proposal it hopes will convince creditors to let the country stay in the euro.

Greece’s finance ministry was not immediately available for comment, while a spokeswoman for the ECB said: “The ECB Banking Supervision is closely monitoring the situation of Greek banks and is in constant contact with the Bank of Greece”.

He declared that justice was above the law, repeated that his victory in securing a rejection of European Union austerity in a snap referendum on Sunday did not mean Greeks wanted to quit the euro.

The European Commission’s vice president for the euro, Valdis Dombrovskis, said member states are open to considering debt relief for Greece.

“The government is doing everything it can to reach an immediate deal and end this cycle of uncertainty”.

“I am certain the agreement will pass Syriza’s parliamentary group, [and] the governing coalition”. He risks breaking with hardliners in his Syriza party who reject any austerity no matter the cost. “The new Greek government is cause for concern, especially because Tsipras has voiced his opposition to North Atlantic Treaty Organisation membership in the past”, Ian Bremmer told BI in January.

Greece, which has until midnight Brussels time (2200 GMT) to file its reform proposals for what would be its third bailout in five years, is teetering on the precipice of financial collapse.

Greece has had two worldwide bailouts worth €240 billion since 2010, the last of which expired on June 30.

But all that has proved insufficient, with Greece struggling through a depression that has shrunk its output by a quarter and sent unemployment rocketing to 26 per cent. Tsipras has repeatedly insisted the debt load needs to be cut again.

USA Treasury Secretary Jacob Lew said that “Greece’s debt is not sustainable” and creditors needed to look at restructuring it – something Germany in particular has said it will not do until Athens shows a commitment to reforms. The creditors will review the measures before European leaders convene Sunday to decide on Greece’s fate.

The USA wants to see debt sustainability in Greece, John Kirby, State Department spokesman, told reporters in Washington Thursday.

At the end of the day, what will have to be restructured is Greek debt owed to European countries and institutions, so the decision on restructuring is going to lie with the European authorities, not with the International Monetary Fund. Only now is Tsipras waking up to the reality that no one in Europe thinks they owe Greece a free lunch. Failure to get a deal could result in the European Central Bank (ECB) cutting funds to Greek banks, forcing the country to issue IOUs or some other form of exchange to prevent economic collapse.

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

The closure of banks and rationing of cash from ATMs was gradually bringing the Greek economy to a standstill.

The capital controls also ban overseas money transfers, isolating Greece and its population of 11 million from foreign suppliers of everything from food to medicine.

Last-minute bookings by foreign visitors to Greece – usually a hotspot summer vacation destination – have plunged by 30 per cent, dealing a serious blow to a sector that accounts for a fifth of the economy. The latest date given is next Monday.

She added that no “haircut” – taking a portion of customers’ deposits to recapitalise the banks – was “foreseen”. But many were fearful it would happen anyway, as occurred in Cyprus two years ago.

Greece may be forced out of the Eurozone economic bloc if a deal is not reached. European stocks rose Thursday while the euro eased to US$1.1039 from US$1.1077 late in New York on Wednesday. Tsipras had previously characterized pension cuts as one of the “red lines” Greece would not cross. But it warned that the recent rise in interest rates on the sovereign bonds in “some euro area economies” could signal larger problems ahead.

The Euro STOXX 50 index remains up 5 percent so far in 2015, while the DAX is up 9 percent.

Greece has asked the eurozone’s crisis fund, the European Stability Mechanism, to give it a three-year loan for an unspecified amount, but no reply has yet been made public.