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Business

Deal on Greek Bailout Needed Within Days

Greece must promise to implement austerity measures in order to receive a bailout

Alexis Tsipras at the Subversive Media Festival in Zagreb, Croatia in 2013, photo: Wikimedia/Robert Crc
1 year ago

ATHENS, Greece – The head of the European Union is resisting Greece’s demand for an emergency leaders’ summit on the country’s troubled bailout program, stressing that finance officials need to resume talks and agree within days on reforms needed.

Greek Prime Minister Alexis Tsipras spoke Wednesday with European Union Council President Donald Tusk to propose the meeting of leaders from the 19 European countries that use the euro currency. But Tusk sounded skeptical, arguing the finance ministers should make more progress before the leaders intervene.

Greece and its creditors — its European partners and the International Monetary Fund — have been struggling to agree on the reforms and cutbacks the country must make to pass the first review of its bailout program, which was originally scheduled for last October. After news of another setback on Tuesday, the Athens stock index was down 3.1 percent in midday trading.

Tsipras’ left-led government had hoped that successful negotiations would allow eurozone finance ministers to meet Thursday to approve the review.

But now it looks as if the impasse could severely delay the review, which Greece needs before it can start other talks with creditors on relieving its crippling debt load. A successful review would also release a long-delayed rescue loan installment, without which Greece will be unable to make scheduled payments to its creditors in the summer.

Athens is already facing a liquidity crunch, and in February Finance Minister Euclid Tsakalotos warned that if the review stretches into May or June, Greece is “done for.”

Julius Baer bank analyst Eirini Tsekeridou said she expects the talks to continue until the time the main scheduled payment is due.

“Until an agreement is reached and the first review is completed there will be no further disbursements towards Greece,” she said in a note. “Despite the statements about progress, we still believe the negotiations will drag until July, when Greece has to make a 2.2-billion-euro payment to the European Central Bank.”

President of the European Council Donald Tusk. Photo: Mateusz Włodarczyk

President of the European Council Donald Tusk. Photo: Mateusz Włodarczyk

In Brussels, Tusk said that the eurozone finance chiefs — known as the eurogroup — need to set another meeting date by which they should agree on a deal. “I am talking not about weeks but about days,” he told reporters.

Tsipras’ office said the prime minister would talk with Tusk again Thursday morning.

EU foreign policy chief Federica Mogherini voiced confidence a deal can be reached “in a very limited time.”

“We believe all conditions are there to find a solution at the eurogroup meeting very soon,” she said.

Greece says there is agreement on creditors’ demands for austerity measures worth three percent of GDP — or 5.4 billion euros ($6.1 billion) — by 2018. These will be achieved largely through pension and tax reforms. But disagreements remain over how to guarantee that an extra 3.6 billion euros in savings that could be needed in the future will be implemented if deemed necessary.

It’s essentially a matter of trust: Athens is offering an unspecified “automatic mechanism,” while the IMF is insisting that the contingency measures be legislated — a move the Greek government says is legally impossible.

Government spokeswoman Olga Gerovassili said Greece would not back down from its positions. But she added that discussions would continue in Athens later Wednesday with creditors at a technical staff level, and insisted there is “no issue” regarding the country’s cash reserves.

“We are confident that a eurogroup meeting will be convened in coming days,” she added.

Teneo Intelligence analyst Wolfgango Piccoli said the best case scenario would be an extraordinary meeting of eurozone finance ministers ahead of the next scheduled gathering on May 24, as this is Orthodox Easter week in Greece.

“In the meantime, Tsipras will continue to perform for domestic political consumption,” he said. “As in previous standoffs with Greece’s international lenders, however, his calls for high-level meetings and/or extraordinary European Council will remain unheard unless technical talks and ministerial negotiations in the eurogroup have taken place.”

Labor Minister George Katrougalos said the government would not accept “additional actions” beyond what it agreed to last summer, when it abruptly abandoned its core anti-bailout policies and signed up to a third rescue loan deal worth about 86 billion euros.

It did that then after defaulting on its debt payments — which could happen again this summer without progress in the bailout negotiations — and to avoid a catastrophic exit from the eurozone.

NICHOLAS PAPHITIS

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