June 16, 2015

Eurozone officials are discussing holding an emergency summit on Sunday for leaders to tackle the crisis in Greece amid mounting fears a deal to break an ongoing impasse between Athens and its bailout creditors will not be reached at a high-stakes finance ministers meeting on Thursday.

According to two senior officials, the idea of holding a summit of eurozone heads of government was mooted in meetings among representatives of Greece’s creditors on Monday, a day after last-ditch negotiations to reach a deal to release €7.2bn in much-needed bailout aid collapsed.

They said that although the idea was discussed, there is considerable resistance to convening the summit among several creditors since technocratic issues like Greek pension reforms and tax rates are not normally the province of EU presidents and prime ministers.

“If there’s nothing to discuss among finance ministers, there wouldn’t be anything to discuss among heads,” said one official from a Greek creditor institution.

The growing prospect of a Greek exit from the eurozone intensified the selling of government debt from peripheral nations in the single currency on Tuesday, erasing from the capital markets the European Central Bank’s stimulatory efforts.

Peripheral bond yields, which move inversely to prices, have risen back to levels seen before investors began to anticipate the ECB’s €1tn bond-buying programme, which was designed to stimulate the economy by suppressing borrowing costs.

The turmoil in bonds was also overshadowing equities with the Euro Stoxx 50 Volatility index, a measure of implied volatility, at its highest level since early January. This barometer of market fear is pressuring equity prices, with eurozone benchmarks well off their earlier peaks for the year.

Yanis Varoufakis, Greece’s finance minister, said the country has no plans to present new proposals at the finance ministers meeting, signalling the country won’t make further concessions to unlock bailout funds needed to avoid default.

He told Germany’s Bild newspaper: “The eurogroup is not the forum for presenting positions and plans which have not previously been discussed and negotiated at a lower negotiating level.”

Greece remained willing to find a solution but creditors need to take Greece’s proposals seriously to end the impasse, he said, urging German Chancellor Angela Merkel “to take the lead”.

A spokesman for Donald Tusk, the European Council president who would be responsible for convening a summit, said there were currently no plans to hold a special session of leaders.

“The next and hopefully decisive step is the eurogroup [on] Thursday,” said the spokesman, Preben Aamann. “Any further steps will be decided in light of the eurogroup outcome. There should be no illusions that an agreement becomes easier or more advantageous over time.”

Still, the fact the idea was discussed reflects mounting concerns that a deal on a list of Greek economic reforms to release the €7.2bn tranche, which Athens needs to avoid defaulting on its debts, remains elusive ahead of what many officials believe is a make-or-break finance ministers’ session.

Alexis Tsipras, the Greek prime minister, has publicly insisted that he will not be presenting any new compromise proposals at the Thursday meeting, and officials said the discussion at the eurogroup of finance ministers on Greece could end up being perfunctory as a result.

In addition, some officials believe Athens’ decision to send Mr Varoufakis, the combative finance minister, to the eurogroup session could preclude a deal being worked on Thursday. Eurozone officials have in the past attempted to work directly with Mr Tsipras, who they view as a more pragmatic negotiator than his finance minister.

The two sides remain far apart on what would constitute an acceptable list of economic reforms that Athens would need to adopt to release the bailout funds and avoid default, which could come as soon as two weeks when a €1.5bn loan repayment falls due to the International Monetary Fund.