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Greece pushes for deal as EU slashes outlook

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greece mapGreece’s growth outlook was slashed by Brussels Tuesday after months of fruitless debt talks, as ministers toured European capitals to push for a bailout deal that will save Athens from bankruptcy.

The feverish diplomacy comes as Greece owes one billion euros to the IMF in coming days, putting it under huge pressure to agree to a solution at a meeting of eurozone finance ministers on Monday.

But Germany’s powerful Finance Minister Wolfgang Schaeuble said he was sceptical a deal could be found in time, meaning the threat of a Greek default and a catastrophic exit from the euro remains a dangerous reality.

“I’m somewhat sceptical whether that’ll be possible by Monday. But I’m not ruling it out,” said Schaeuble, one of the harshest critics of Prime Minister Alexis Tsipras’s radical leftist government in Athens.

Greece’s controversial finance minister Yanis Varoufakis — who has denied recent reports that he has been sidelined — visited Paris and Brussels on Tuesday to drum up support for Athens.

– ‘Difficult’ communications –

Varoufakis has been increasingly scorned by his counterparts in the Eurogroup of eurozone finance ministers and his last minute tour, which will also include Italy and Spain, was intended to mend fences.

“Communication between ministers at the Eurogroup is difficult,” Varoufakis said after meeting France’s Michel Sapin in Paris. “There are many of us and we can’t discuss amongst one another.”

Deputy prime minister Ioannis Dragasakis, a close Tsipras ally, was separately meeting with European Central Bank head Mario Draghi in Frankfurt later Tuesday in a bid to increase liquidity for Greece’s stretched banks.

A team of Greek officials has been in Brussels since last week holding intense talks with EU and IMF officials to hammer out the details of a possible deal.

The government of Tsipras, which came to power in January, is resisting intense pressure from Greece’s EU-IMF creditors to pursue radical reforms such as cuts to pensions and wages.

In turn, the creditors are refusing to release the last tranche of aid funds worth 7.2 billion euros from Greece’s current bailout unless Athens adopt the reforms.

– Heavy price –

The price that Greece has paid for failing to make a deal was laid bare on Tuesday.

Brussels sharply slashed its growth outlook for Greece for 2015 to 0.5 percent, a huge slump from its earlier prediction of 2.5 percent.

Economic Affairs Commissioner Pierre Moscovici, who met Varoufakis on Tuesday, said it was “unavoidable” because of the “persistent uncertainty” caused by the Greek debt crisis.

“Even this meagre growth rate is on the condition that an agreement is reached between Greece and the EU/IMF by June,” added the EU’s Commissioner for the euro, Valdis Dombrovskis.

Greece’s debt, already the highest in the eurozone, would meanwhile soar to 180.2 percent of annual economic output this year, before falling slightly to 173.5 percent in 2016, the EU said.

Greek unemployment is set to remain sky-high at about 25 percent.

Key to saving Greece is the talks with the European Central Bank, which is not only a huge creditor to Greece but can provide or cut off crucial loans to the country’s fragile banks.

Greek banks are dependent on the ECB for financing, but the eurozone’s central bank has said it will no longer accept Greek sovereign bonds as collateral for loans until Tsipras accepts a new deal.

“This cannot continue indefinitely,” said Christian Noyer, the head of the French central bank and a powerful member of the ECB’s governing board.


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