Greece makes application for third bailout

Greece has submitted an application for a third bailout, saying it will begin implementing tax and pension reforms if Europe provides the funding.

New finance minister Euclid Tsakalotos requested a three-year aid plan from the European Stability Mechanism, the EU’s permanent bailout fund.

The European Central Bank has decided not to increase the amount of emergency credit that Greek banks can draw on.

Reuters reported the ECB is waiting to see how Greece’s creditors respond to its financial aid request and its reform agenda, due to be published by tomorrow.

Greek prime minister Alexis Tsipras earlier pleaded in the European Parliament on Wednesday for a fair deal to keep his country in the euro zone, acknowledging Greece's own responsibility for its plight, after EU leaders gave him five days to come up with reforms.

Mr Tsipras said his government will submit “credible reform” proposals to its creditors on Thursday.

Euro zone finance ministers will hold a conference call on Wednesday to discuss the Greek debt issue.

The country submitted a formal request for a three-year loan from the ESM but did not specify in its letter the volume of financing sought.

This letter includes promises to implement pension and tax reforms as early as next week as the first step to securing a three-year rescue loan to cover debt obligations.

Greece also pledged to honour its financial obligations and detail by Thursday reforms proposals for evaluation by the creditors.

“We trust Member States appreciate the urgency of our Loan request at this time given the fragility of our banking system, our shortage of available liquidity, our upcoming obligations, our build-up of internal arrears, and our expressed desire to clear our outstanding arrears with the IMF and the Bank of Greece,” the letter from the Greek finance minister said.

Athens also said it welcomed an “opportunity to explore potential measures” to make its debt sustainable, as part of broader discussions to be held.

Mr Tsipras seemed relaxed and confident, with a note of humility, when he appeared before EU politicians in Strasbourg to cheers and scattered boos.

Speaking hours after euro zone peers, at another emergency summit in Brussels, set Greece a deadline of the end of the week to come up with convincing reform proposals, Mr Tsipras said Greeks had no choice but to demand a way out of “this impasse”.

“We are determined not to have a clash with Europe but to tackle head on the establishment in our own country and to change the mindset which will take us and the euro zone down,” he said to applause from the left.

European Council president Donald Tusk repeated the final deadline for Greece to submit convincing reform plans and start implementing them was this week.

“Our inability to find an agreement may lead to the bankruptcy of Greece and the insolvency of its banking system,” Mr Tusk said. “And for sure it will be most painful for the Greek people.

“I have no doubt that this will affect Europe, also in the geopolitical sense. If someone has any illusion that it will not, they are naive,” he said.

Some EU politicians held up “Oxi” (No) signs to back Greek voters’ rejection of more austerity.

If experts from the European Commission, European Central Bank and International Monetary Fund deem Greece's proposals viable, euro zone finance ministers would meet on Saturday to recommend opening negotiations with Athens, and a special summit of the 28-nation EU would meet on Sunday to approve an aid plan.

Euro zone sources said the key question is whether the Greek reform package will be more ambitious than the spending cuts, tax increases and modest reforms that Greek voters rejected on Sunday in a referendum on a previous bailout plan.

Mr Tsipras acknowledged his radical government’s share of responsibility for what had gone wrong in its five-and-a-half months in office but said the bulk of Greece’s problems lay in a failed austerity policy imposed over the last 5 and a half years of crisis.

He was also strongly critical of Greece’s failings as a society, citing a history of clientelism, corruption, chronic tax evasion that had “run riot”, inequality and “the nexus of political and economic power”.

While Athens has made strides since 2010 in turning around its public finances to post a budget surplus before debt service, it has lagged on implementing structural reforms.

Reuters