Greek bailout talks to 'intensify'
By Eric Maurice
Greece and its creditors decided on Monday (20 March) to "intensify" talks to agree on reforms needed to unblock a new tranche of financial aid, amid concerns over the country's economic situation.
The talks will take place in Brussels this week. They will involve representatives from the creditor institutions - the European Commission, the European Central Bank, the European Stability Mechanism (ESM) and the International Monetary Fund (IMF) - and from the Greek government, including finance minister Euclid Tsakalotos.
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Talks could last two or three days, according to a source that will be involved, who added that "the number of issues is not so big that we need longer than that".
The conclusion, agreed in 2015, of the second review of the bailout programme, has been blocked for several months. The main obstacles are the reforms of the labour market and of the pension system, as well as the fiscal targets that need to be reached after the end of the programme in 2018.
In total, the Greek government needs to adopt measures that will cut spending by €1.9 billion and increase revenues by €1.9 billion.
When a so-called staff level agreement between the Greek government and the institutions is reached, eurozone finance ministers will have to approve it in order to unblock a new loan - the amount of which is still unknown.
"There is a strong agreement and a strong will between all parties involved to finish the remaining issues as quickly as possible," Eurogroup president Jeroen Dijsselbloem told reporters after a meeting of eurozone finance ministers in Brussels.
He added however that there was "no promise that all the work will be done in time" to reach a political agreement at the next Eurogroup meeting on 7 April.
The conclusion of the second review, which should have been reached more than a year ago, depends on an agreement between Greece and its creditors, but also largely on an agreement between the creditors themselves.
The political agreement over a new loan will have to include the IMF, which has been insisting on further budget cuts from the Greek government in order to reach the fiscal targets set in the bailout programme.
The IMF considers that the target - a 3.5-percent of GDP primary budget surplus - is too difficult to meet and will make Greek debt unsustainable, while EU creditors say that Greek economic performances make it realistic.
The IMF also insists on debt relief measures and said it could continue to participate in the bailout only if Greek debt is sustainable. Germany opposes debt relief but rules out any agreement without the IMF.
"A majority of eurozone members would agree on the IMF bringing just expertise, but Germany and Netherlands insist on having [the IMF]" as a full acting member of the creditors group, an EU source noted on Monday, suggesting that the fund will prevail in its demands.
With another Eurogroup meeting finished with no agreement, concerns are growing over the possibility of a new showdown between Athens and its creditors, like in 2015, with consequences for the Greek and EU economy.
"It is important to avoid delays that would be negative for the [Greek] economic recovery," EU finance commissioner Pierre Moscovici said after the ministers meeting.
In a recent article, Greek journalist Nick Malkoutzis noted that "tell-tale signs of the ongoing erosion of confidence" could be seen in recent data, such as the smaller budget surplus and revenues than expected or the rise in unpaid taxes.
'Not a reassuring sign'
Greek banks have also started to use more money from the ECB's Emergency Liquidity Assistance mechanism, after losing about €4 billion in deposits in recent months.
"It is not a reassuring sign," the EU source told EUobserver.
Various players in the talks suggest that Greece will be obliged to accept the IMF demands when its liquidity reserves are in danger of running out due to debt repayments.
"The next big debt service payment is due only in July, but it would be much better to conclude before that," ESM chief Klaus Regling said on Monday.
EU sources have said that they were confident that an agreement will be found in May, because it would be the last chance before which the disbursement procedure could take place, in time for the July debt instalment.
"In normal situation, Greece would not be able to meet its debt commitment without a new disbursement," a second EU source said.
A source close to the Greek government refused to comment and said it would "not engage in such negative thinking".
To the last minute
"With the uncertainty around the talks, the whole economic situation is deteriorating, but there is no panic, no sense of urgency because we are used to it," Thanasis Koukakis, a financial journalist and analyst in Athens, told EUobserver.
"There is no liquidity problem now," he said, adding that thanks to last year's economic results, the Greek government "has the capabilities to go to October" before facing a liquidity crisis.
Greek prime minister Alexis Tsipras has to deal with opposition within his Syriza party and his government coalition with a nationalist party. And opinion polls now credit him with a 14-percent popularity rate, Koukakis said.
"It is very difficult for Tsipras to do reforms that are usually done by liberals," he argued. "It would be bad for him to take politically toxic measures."
As result, the Greek analyst said "everybody is waiting until the last minute to make a compromise."