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Greece debt crisis: PM Alexis Tsipras denounces 'blackmail'; EU warns of 'game over'

Greece debt crisis: PM Alexis Tsipras denounces 'blackmail'; EU warns of 'game over'

European Council President Donald Tusk retorted: "It is not political blackmail when we repeat day after day that we are very close to this day (June 30) when the game is over."

Greece's Prime Minister Alexis Tsipras arrives at the EU Council headquarters at the start of a European Union leaders summit in Brussels, Belgium, June 26, 2015. Photo: Reuters Greece's Prime Minister Alexis Tsipras arrives at the EU Council headquarters at the start of a European Union leaders summit in Brussels, Belgium, June 26, 2015. Photo: Reuters

Greek Prime Minister Alexis Tsipras accused international creditors of "blackmail" on Friday after euro zone partners offered to release billions in frozen aid in a last-minute push to win his acceptance a cash-for-reform deal.

German Chancellor Angela Merkel and French President Francois Hollande met Tsipras on the sidelines of an EU summit to coax him to accept an offer to fill Athens' empty coffers until November in return for painful pension and tax reforms.

If Greece does not clinch an agreement at the weekend to unlock funds, it is set to default on an International Monetary Fund loan on Tuesday, possibly sparking a bank run, capital controls and raising doubts about its future in the euro zone.

But Tsipras sounded defiant on leaving the summit, telling reporters Greece would fight for the European principles of democracy, solidarity, equality and mutual respect.

"These principles were not based on blackmail and ultimatums," he said in English. However, he did not rule out accepting a deal and officials said intensive behind-the-scenes contacts were continuing to seek a last-minute compromise.

European Council President Donald Tusk retorted: "It is not political blackmail when we repeat day after day that we are very close to this day (June 30) when the game is over."

Tsipras was due to fly back to Athens to confer with his Cabinet and his ruling Syriza party on the next steps.

Merkel said she and Hollande had urged him in a 45-minute private meeting to accept the creditors' "generous" offer.

"We have taken a step towards Greece," she said. "Now it is up to the Greek side to take a similar step."

Both she and Hollande said Saturday's meeting of euro zone finance ministers would be the decisive moment for a deal since time was running out to secure German parliamentary approval in time to release funds needed to avert a Greek default.

The creditors laid out terms in a document handed to Greece on Thursday. It said Athens could have 15.5 billion euros in EU and IMF funding in four instalments to see it through to the end of November, including 1.8 billion euros by Tuesday as soon as the Greek parliament approved the plan.

The total is slightly more than Greece needs to service its debts over the next six months but contains no new money.

A French official said Merkel and Hollande also discussed with Tsipras outstanding differences on reforms creditors want Greece to accept - centred on pension reform, labour law and increasing value added tax - as well as an extension to Athens' bailout programme and financing.

European Commission President Jean-Claude Juncker, who spent part of the night thrashing out the issues out with Tsipras, said there was no ultimatum to Greece and he was "quite optimistic but not overly optimistic" there would be a deal.

"PLAN B"

The Eurogroup ministers will meet at 2 p.m. (1200 GMT) on Saturday and Greece will be asked whether it accepts a revised offer from the European Commission, the European Central Bank and the International Monetary Fund, a euro zone official said.

If Greece refuses, the ministers will move on to discussing a "Plan B" on preparing to limit the damage from a Greek default to Greek banks and other euro zone countries and markets, the official said.

However, Merkel and Hollande have refused to talk publicly about a "Plan B", saying their efforts are focused on getting an agreement to keep Greece in the euro zone.

Officials said talks to reconcile the creditors' and Greek positions were continuing behind the scenes, even though Greece continues to denounce the lenders' proposals.

Greek Finance Minister Yanis Varoufakis had another blast at the creditors' approach in an interview with Irish radio on Friday, saying their demands for tax increases and pension cuts as conditions for disbursing aid were putting Greece in an impossible position.

"I am against increasing the corporate tax, but then again I am against raising the tax on hotels and against cutting the pensions of people who live below the poverty line," Varoufakis said on Irish national radio RTE.

"These issues are putting me and my government in an impossible position, having to make a bad choice among really hard, difficult bad choices."

But he did not rule out accepting the terms.

Dramatising the choice facing Athens, Germany's member of the European Commission, Guenter Oettinger, said Greece had five days left to avoid an exit from the euro zone.

DIVIDED

Euro zone finance ministers are divided over whether a default would necessarily lead to Athens leaving the 19-nation single currency area, which would undermine the principle that membership is irrevocable.

Failure to pay the 1.6 billion IMF euro instalment on Tuesday could trigger a bank run, capital controls to curb deposit flight and possibly the issuance of IOUs or a parallel currency.

China, a growing economic partner of the EU, offered a vote of confidence in the euro zone on Friday ahead of Premier Li Keqiang's visit to Europe next week, saying it was sure Greece's talks with creditors would go positively.

Confidential documents drawn up by Greece's creditors and seen by Reuters showed that the country's debt would remain sustainable, even under a worst-case scenario envisaged by the IMF, if the maturities on euro zone loans were extended and interest rates were cut, without the need for a write-down.

The calculations are regarded as crucial to persuade German lawmakers to agree to the aid disbursement.

They showed that in the most severe case, Greek debt would require substantial "reprofiling" and improved lending terms but no "haircut" nor budgetary costs for the lenders.

Tsipras and Varoufakis have insisted so far that a commitment to debt relief is essential for Greece to accept any deal, while Germany and its allies had refused up to now to discuss the issue until Athens enacts and implements the reform programme to complete its current bailout.

The fact that Hollande and Merkel discussed financing issues with Tsipras on Friday may indicate a new willingness to address the issue as part of a deal.

(Additional reporting by Matthias Sobolewski in Berlin, Jan Strupczewski and Andreas Rinke in Brussels)

(Reuters)