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EU sees 'opportunity' for a debt deal with Greece after emergency talks

AFP I Greeks participate in a pro-European demonstration in front of the Greek parliament in Athens on June 22, 2015

Eurozone finance ministers were cautiously optimistic on Monday that a deal on Greece's bailout was finally within reach this week, amid fears the country might otherwise default on its debts and fall out of the euro.

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With leaders from the 19 single currency nations gathering in Brussels, financial officials gave a tentative endorsement to new Greek proposals for spending cuts and reforms they would make in exchange for billions of euros in fresh loans.

“It’s an opportunity to get that deal this week,” said Jeroen Dijsselbloem, the Dutchman who chairs the eurozone finance minister meetings.

He said the technical experts who are evaluating the Greek plan believe it “is broad and comprehensive but they really need to look at the specifics to see whether it adds up in fiscal terms”.

French President François Hollande said the EU and creditors were making progress with Greece and that a deal could be signed as early as Wednesday.

“We are moving towards an accord,” Hollande told reporters after the emergency meeting. “There is still work to be done... every effort must be made so that when eurozone finance ministers meet Wednesday, a solution is in sight.”

The news gave a boost to stock markets. Athens shares, which had lost much of its strong gains on the news that there has been no definitive deal at a meeting on Monday, rebounded on the positive comments. It closed 9 percent higher. The Stoxx 50 index of top European shares was somewhat less volatile but was trading 3.6 percent higher.

The need for a deal could not be more pressing. Greece must pay 1.6 billion euros ($1.8 billion) to the International Monetary Fund in just over a week, on June 30. Further payments are due in July and August, and the leftwing government in Athens does not have the money to pay them.

Fear of worst case scenario

Negotiations on the reforms that Greece must undertake to secure its financial future have dragged on since February.

A debt default by Greece could destabilise its banks – Greeks are already withdrawing increasingly large amounts of money – and could in a worst case scenario cause the country to have to leave the euro.

That would be hugely painful for Greeks but experts are more divided about its effects on Europe and the world economy. Several European countries have said publicly they are preparing for the possibility.

"AN EMOTIONAL STORY"

"There’s a huge economic cost to a 'Grexit' and we can’t rule out the risk of contagion,” FRANCE 24's Europe editor Christophe Robeet said on Monday. “Think about the political message that Europe would be sending to the markets – that the Euro group is not a political group but merely a gathering of accountants who can’t agree on figures.

"This is precisely the image of division that Europeans want to avoid.”

Despite the urgency of the situation, German Chancellor Angela Merkel and other European officials warned against focusing too much on Monday’s summit.

“There are still a lot of days left to come to a decision,” Merkel said before heading to Brussels.

European Commission President Jean-Claude Juncker, who has been a key player in the efforts to broker a deal, said that “we are on the right path, but we still have some way to go”.

Robeet described the negotiations as a "very difficult balancing act" for Merkel, Hollande and Juncker.

"They don’t want to give in too much, they don’t want to embolden other anti-austerity parties like Podemos in Spain," he said. "At the same time they want to keep Greece in Europe.”

Greek Prime Minister Alexis Tsipras said late on Monday it was now up to European authorities to find a deal.

“The ball is in the court of the European authorities,” Tsipras told reporters after the summit.

“We don’t want a fragmented deal that is only for a limited time. We want a complete and viable solution.”

Mass withdrawals

Despite the upbeat mood in markets, tension was palpable in Greece, where people have flocked to cash machines to withdraw money. The concern is that a debt default by Greece could destabilise the country enough that it might eventually have to leave the euro.

“Everyone’s going (to the banks) to take money,” said Yannis Nikolopoulos in Athens. “If the banks shut it’ll be a problem to go shopping and that sort of thing.” Without a deal, he said, “we’re doomed”.

To support Greek banks in the face of growing money withdrawals, the European Central Bank increased the amount of emergency credit it allows the banks to draw on, officials said.

Reports indicate Greeks withdrew about 4 billion euros last week.

The current talks centre on releasing the last 7.2 billion euros in the country’s bailout programme, which expires at the end of the month.

Since coming to power in January, the new government has refused to make more budget austerity measures, which it blames for devastating the economy. It has since softened its approach, but it remains reluctant to take all steps creditors demand.

No details of Greece’s latest offer have been made public.

(FRANCE 24 with AP, AFP, REUTERS)

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