In Athens, the Greek government said it had committed to seeking its third bailout since 2010, with a revised request “taking into account” the concerns of creditors who have demanded more cuts to pensions and bigger taxes.
And in Brussels, Tsakalotos — who replaced outspoken motorbike-riding predecessor Yanis Varoufakis after he resigned on Monday in a bid to ease the rift with Athens’s creditors — told reporters there had been “progress” at the talks.
But their words did little to dispel the fear gripping world financial markets, with Asian shares plunging on Wednesday morning and the euro hitting a five-week low of $1.0916 in New York trading on Tuesday.
– Grim in Greece –
Fears that a “Grexit” could upend the global financial system have sparked worldwide concern, prompting US President Barack Obama to call Merkel and Tsipras before the summit.
Renowned economists including Thomas Piketty and Jeffrey Sachs also published an open letter to Merkel urging the leader of Europe’s biggest economy to cut Greece’s debt to “avoid further disaster”.
The mood was also grim on the streets of Greece, where liquidity starved banks are expected to keep their doors closed until Thursday at the earliest and fears are rising that ATMs could soon run empty.
Greece’s banks have been shut since its most recent international bailout programme expired last Tuesday while capital controls have been imposed, limiting withdrawals to 60 euros a day.
The ECB, which has been keeping Greek lenders afloat, said Monday it had decided to maintain emergency funding to the country’s banks — so-called Emergency Liquidity Assistance (ELA) — at its current level of 89 billion euros.
But it said Greece had to provide more collateral, a move that will make it more difficult to access the vital funds in the future.
Greece on June 30 became the first advanced economy to default on an International Monetary Fund loan, on the same day its EU-IMF bailout expired. On July 20 it faces a huge payment of more than three billion euros to the ECB.
