Greek debt crisis: Greece squeezed by Germany as deadline looms

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Jens Weidmann, head of the Bundesbank, said capital controls should stay in place and Greek banks should get no extra support from central banks until a deal had been signed.

“Central banks need to show where their limits lie. The eurosystem should not increase the liquidity provision, and capital controls need to stay in force until an appropriate support package has been agreed… and the solvency of both the Greek government and the Greek banking system has been ensured.”

His comments underlined the opposition building in Germany towards further support for Greece after months of wrangling which have seen the country brought to the brink of exiting the euro.

Mario Draghi, president of the European Central Bank which is at the heart of negotiations, said that the debt crisis was becoming increasingly hard to fix.

Asked if he would be able to close the dossier on Greece, he said: “I don’t know. This time it is really difficult.”

 

Weidmann added: “It needs to be crystal clear that responsibility for further developments in Greece… lies with the Greek government and the countries providing assistance, not the ECB governing council.”

But stock markets across Europe rose on hopes that a last-minute deal could be struck.

The FTSE 100 rose 43.63 points to 6534.33 while markets in Germany, France and Spain were up by around 1%.

 

Greek newspapers reported Tsipras had come up with a new reform package worth €12 billion (£8.6 billion) over the next two years which would be larger than anything yet proposed by his government.

This would see Greece swing from growth of around 0.5% this year to shrinkage of some 3%, the Greek newspaper Kathimerini reported.

A second newspaper, Naftemporiki, detailed what it said were proposed tax hikes to find the money, an increase in corporate tax to 28% from 26%; a rise in VAT on luxury goods to 13% from 10%; in VAT on processed foods, restaurants, transport and some health services offered by the private sector to 23% from 13%; a VAT hike on hotels to 13% from 6.5%.

 

Chris Beauchamp, senior market analyst at spreadbetter IG, said: “Equity markets have rebounded this morning, with evident relief among investors that the Greeks have actually managed to submit their loan application. Now we have to wait for the creditors to decide whether Athens has made enough concessions.”

Greece’s stock exchange will remain closed until July 13, the country’s capital markets commission said today, after authorities decided to extend the closure of banks and capital controls.

Source Article from http://www.standard.co.uk/business/business-news/greek-debt-crisis-greece-squeezed-by-germany-as-deadline-looms-10377569.html

July 10, 2015 |
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