BRUSSELS/ATHENS Greece snubbed its international lenders and legislated plans on Thursday to give pensioners a one-off Christmas bonus despite misgivings from creditors in a standoff over the country's third bailout.
Lenders on Wednesday said they were suspending a deal clinched earlier this month to offer Greece short-term debt relief after Prime Minister Alexis Tsipras unexpectedly said he would grant low-income pensioners a pre-Christmas payoff.
Tsipras' action infuriated officials in Germany and several other member states, but French President Francois Hollande and his finance minister came to Tsipras' defence on Thursday in a sign of European divisions over how to handle Greece.
Tsipras, a leftist firebrand who swept to power in early 2015, promising to do away with austerity only to sign up to another bailout months later, insisted the one-off fiscal break would not derail the economic targets outlined in Greece's bailout plan.
"I want to stress that these are measures that do not jeopardise the programme nor the primary surplus for 2016 and have no fiscal impact on 2017 and 2018," he told a news conference in Brussels.
Greece, Tsipras said, was meeting its bailout commitments "to the letter." He was due to meet German Chancellor Angela Merkel on Friday.
Merkel said she anticipated there would be a discussion about the issue, but said she did not intend to get involved in negotiations on the Greek package.
As shadowboxing over dealing with Greece's conundrum deepened, lawmakers in Athens backed the decision to allocate 617 million euros - a surplus from savings - in a bonus to pensioners.
"(Greek) people have to see that sacrifices of now six, seven years are at last starting to pay off," Greek Finance Minister Euclid Tsakalotos said.
About 5,000 pensioners, jaded by those sacrifices and almost a dozen pension cuts which have pushed almost half of the country's elderly into poverty, marched peacefully through the streets of Athens on Thursday night.
"We came here to send a message. No more!" protesting pensioner Efstratios Bozos told Reuters. "Our pensions have become restaurant tips."
Arriving at the Brussels summit, France's Hollande said it was wrong to prevent Greece from taking "sovereign decisions" and suggested that euro-zone ministers had not granted Athens sufficient debt relief.
French Finance Minister Michel Sapin, speaking in Paris, expressed understanding for Tsipras' decision to spend 617 million euros on pensioners.
Greece unveiled the pensioner payout and a separate decision to keep lower value-added tax on some islands without consulting euro zone governments, which now own most of Greece's public debt, although the bailout agreement says such a consultation is a must.
The consultation would have given lenders time to assess the fiscal and economic consequences of the two Greek decisions for the bailout reform programme and targets. Germany has asked the institutions to check if the Greek decisions are in line with bailout obligations.
The differences come amid a deep rift between Athens, its European partners and the International Monetary Fund over the reforms needed to get the Greek economy, in recession since 2009, back on track.
The IMF sees the euro zone's economic targets for Greece as overly ambitious and the assumptions about reform implementation too optimistic.
The IMF is also at odds with Germany and some other northern European countries over granting Greece more significant debt relief. Berlin wants to retain leverage over Athens and is reluctant to grant it favours that could anger conservative allies of Merkel before a federal election in the autumn.
The IMF, which participated in the first two bailouts for Greece, has so far refused to inject funds this time amid the standoff over economic assumptions and debt relief.
"I'm hopeful that we will be able to reach an agreement," Tsakalotos said. "I am very disappointed with the IMF, which said it would be a roaring lion in forcing the Europeans to provide more in debt relief, but has turned out to be a rather tame pussycat instead."
(Additional reporting by Francesco Guarascio, Andrea Shalal, Philip Blenkinsop, Michel Rose and Gina Kalovyrna; Writing by Michele Kambas; Editing by Ralph Boulton and Leslie Adler)