Eurozone Leaders to Hold Emergency Summit on Greece

June 18, 2015 Updated: June 19, 2015

LUXEMBOURG—The eurozone’s 19 leaders have been summoned to an emergency summit next week after talks about Greece’s bailout ended in acrimony on Thursday, intensifying fears that the country was heading for bankruptcy and an exit from the euro.

Donald Tusk, who chairs meetings of European leaders, called them to Brussels on Monday evening to “urgently discuss the situation of Greece at the highest political level”—frustrated at the lack of progress less than two weeks before a big payment Athens has to make to the International Monetary Fund.

It will be one of, if not, the most important meeting in the euro’s 16-year existence. Greece’s future in the currency, which it joined in 2002, could very well be at stake when Greek Prime Minister Alexis Tsipras faces his peers, including German Chancellor Angela Merkel and French President François Hollande.

“The key emergency, in my view, is to restore a dialogue with adults in the room,” IMF Managing Director Christine Lagarde said.

However Lagarde’s comment is interpreted, the decision to call the summit is a clear sign that relations between Greece and its creditors are as strained as at any time since Athens was first bailed out five years ago.

Greek Finance Minister Yanis Varoufakis acknowledged that relations have reached a low point.

It cannot be about smoke and mirrors; it has to be tangible proposals.
— Christine Lagarde, managing director, IMF

“There is a lack of trust in the eurogroup,” he said after a meeting where he claims he brought a “radical, innovative proposal.”

Details of the offer were unclear, but Lagarde said “it cannot be about smoke and mirrors; it has to be tangible proposals.”

Greece is running out of time to secure a deal to get the money it needs to meet upcoming debt payments. First and foremost, it has to pay around 1.6 billion euros ($1.8 billion) to the IMF on June 30.

With the clock ticking, Lagarde said Greece’s debt obligation is not up for negotiation.

“There is no period of grace of one or two months as I have read here and there,” she said. “It’s due on June 30.”

Without a deal that would unlock the remaining cash—about 7.2 billion euros ($8.21 billion) in its bailout fund, Greece faces bankruptcy.

If no solution is found by the end of the month, it could be left to its own devices without even the support of the European Central Bank to prop up the country’s banks. Since Greece is effectively broke and relying on outside help, it may have no option other than to introduce a new currency—most likely the centuries-old drachma—to pay wages, salaries, and pensions.

As Thursday’s meeting broke up, at least 7,000 people gathered outside Parliament in central Athens in a peaceful rally backing membership in the currency zone and the European Union.

Varoufakis and others claimed a deal was still possible.

“There is no question that Greece needs to make adjustments,” he said. “The question for us is: What kind of adjustments?”

Perhaps the main reason why there has been no meeting of minds is the Greek government’s insistence that its burden is addressed alongside the bailout. It wants some sort of restructuring of the debt burden, which stands at near 180 percent of annual GDP. That could take the form of lower interest rates on the debt or extending the date by which the debts have to be repaid.

“Dealing with the debt repayments of a highly indebted nation state that has no access to markets and that has no access to devaluation is of the essence of rendering that economy stable and sustainable,” said Varoufakis.

Jeroen Dijsselbloem, the eurozone’s top official, said the eurozone stands by its 2012 commitment to “consider further measures and assistance,” but only if Greece meets all its reform promises.