June 6, 2015 / 2:29 PM / 2 years ago

EU's Juncker snubs Greek PM after 'absurd' debt deal rebuff

Greek Prime Minister Alexis Tsipras walks with European Commission President Jean-Claude Juncker (L) ahead of a meeting at the EU Commission headquarters in Brussels, Belgium, June 3, 2015.Francois Lenoir

BRUSSELS/ATHENS (Reuters) - The European Union's chief executive declined to speak to Greek Prime Minister Alexis Tsipras on Saturday after the leftist leader rejected as "absurd" international creditors' terms for a cash-for-reform deal to keep his country from default.

An EU official said European Commission President Jean-Claude Juncker, who has tried to bridge the gap between Athens and its lenders, refused to take a telephone call from the Greek premier since there was nothing new to discuss.

A Greek government official denied the report and said Tsipras held a conference call on the debt crisis with German Chancellor Angela Merkel and French President Francois Hollande.

The unresolved debt impasse, which is weighing on financial markets and could hit the global economic recovery, will hang over a Group of Seven leaders' summit that Merkel will chair in southern Germany from Sunday. A German spokesman said Tsipras was not invited.

With time running out for a debt deal and Greece struggling to meet its payment obligations, relations between Athens and its European and IMF lenders have turned increasingly raw.

A European Commission spokeswoman said in a text message: "I can confirm that there was a request for a call. President Juncker and PM Tsipras will certainly stay in contact in the coming days, as was said in the statement on Wednesday night."

Tsipras had been due to return to Brussels for more talks on Friday but, faced with a backlash inside his Syriza party, went to the Greek parliament instead and denounced the creditors' conditions as a "very bad negotiating trick".

"The Greek prime minister requested a phone call for 1100 CET on Saturday, but Juncker declined because there has been no progress in the discussions, and proposals that the Greek side promised on Wednesday night to deliver on Thursday have not arrived," the EU official told Reuters.

"There have been no new developments so there was nothing to discuss," the official said.

European Parliament President Martin Schulz, who has been supportive of Greece's cause, also voiced exasperation, telling the Passauer Neue Presse newspaper: "The stubbornness of the Greek government is infuriating."

German Vice-Chancellor Sigmar Gabriel, a Social Democrat more sympathetic to Athens than his conservative coalition partners, warned in a newspaper interview that the mood in Germany was now for letting Greece leave the euro zone.

Asked if he saw a deal soon, Gabriel said: "That depends solely on the Greek government. Europe has gone to its limits."

Greece postponed a payment to the International Monetary Fund due on Friday until the end of June, highlighting its precarious cash position and spooking markets. The move gave it a few extra days to negotiate a deal it wants linked to future debt relief.

An EU diplomat said Tsipras would fly to Brussels on Tuesday before a two-day EU-Latin America summit, and that would be an opportunity for political talks on a solution, while experts from Greece and the EU/IMF lenders work on detail in parallel technical negotiations.

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Brussels officials still believe Tsipras wants a deal but they are exasperated with Greek rhetoric and brinkmanship.

Finance Minister Yanis Varoufakis kept up that barrage on Saturday, saying that the proposal handed to Tsipras on Wednesday was "almost offensive".

"I cannot imagine they really meant this to be the basis for an agreement, it was meant as an aggressive move, to terrorize the Greek government. Without realizing that this government cannot be terrorized," he told Sunday's Proto Thema newspaper.

By focusing anger on two of the lenders' key demands, the scrapping of an income supplement for the poorest pensioners and the hiking of value-added tax on electricity, Tsipras left open possible alternatives to those measures to clinch an agreement.

French Finance Minister Michel Sapin told Reuters the creditors' plan was negotiable, not an ultimatum, and urged Athens to offer an alternative to the pension benefits cut, to which he said Greek objections were "not without legitimacy".

Officials have said mid-June is the final deadline for a deal to secure ministerial approval and parliamentary backing for disbursement before Greece's 240 billion euro ($267 billion) bailout expires at the end of the month.

The lenders added an incentive by raising the prospect of releasing an additional 10.9 billion euros in frozen funds originally earmarked for bank recapitalization to tide Athens over a big repayment hump in July and August.

But the EU official cautioned that with each day that deposits continue to flow out of Greek banks, the amount potentially available to the state from that fund diminishes, since the lenders will need it to rebuild their reserves.

Merkel tried to force a deal before the annual G7 meeting of leaders of major industrial democracies at Schloss Elmau in Bavaria from Sunday. She is keen to avoid it turning into another crisis summit on the euro zone that would showcase Europe's inability to solve the problems of its single currency.

European officials said they did not want to be lectured on Greece by U.S. President Barack Obama, but they expected Merkel, France's Hollande, Italian Prime Minister Matteo Renzi and the presidents of the European Commission and the European Council, Juncker and Donald Tusk, to discuss the way forward to a solution on the sidelines.

An Obama administration briefing reporters before the G7 said: "We're obviously encouraging all sides to continue to focus on finding a solution that’s going to allow Greece to chart a path to recovery."

One far-left Greek deputy minister suggested snap elections as a way out, by obtaining public legitimacy for difficult decisions to secure aid. But two ministers said on Saturday they saw no case for an early poll and an opinion poll showed Greeks have little appetite for a return to the ballot box just five months after Tsipras won power promising to end austerity.

($1 = 0.9000 euros)

Additional reporting by Renee Maltezou and Gavin Jones in Athens and Michael Nienaber in Berlin; Writing by Paul Taylor; Editing by Mark Trevelyan

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