With the failure of reform negotiations with international lenders, Greece’s Leftist-led government is in the same position as last year, world press reports say.
Negotiations Stall Between Greece and International Lenders
The Wall Street Journal/Nektaria Stamouli and Marcus Walker
Negotiations between Greece and its international creditors ran into trouble on Tuesday over demands for extra austerity measures, denting hopes for a quick end to the monthslong deadlock over the country’s bailout.
The impasse is the latest in a saga of troubled talks. The Greek government and the International Monetary Fund are at loggerheads over how to find up to €3.6 billion ($4 billion) in so-called contingency measures, or additional austerity, if Greece misses its budget targets.
Finance Minister Euclid Tsakalotos has argued since last weekend that the savings should come by trimming public spending across all government departments if Greece’s fiscal watchdog says it is needed.
But IMF officials argue across-the-board cuts make little sense, and that the ax should fall where there are still inefficiencies. That, in the IMF’s view , mainly means cutting pensions and eliminating income-tax exemptions—politically explosive overhauls for most any government.
Greek and some European Union officials had hoped an agreement could be reached quickly and approved by eurozone finance ministers on Thursday.
But that meeting was postponed on Tuesday. “More time needed,” tweeted Michel Reijns, the spokesman for Dutch Finance Minister Jeroen Dijsselbloem, who presides over the so-called Eurogroup.
“Meeting on first review, contingency package and debt at later stage,” he added.
It wasn’t clear when negotiations would resume.
Some in Athens fear that if there is no deal—and Eurogroup meeting—by early next week, the group might not convene before May 24, its next scheduled meeting.
That could put Greece under financial strain because of the additional time that might be needed to seal all the agreements. Greece has large debts coming due in July and is facing potential default if fresh bailout funds aren’t unlocked before then.
Eurogroup Delay On Greece Might Not Be Deathblow
Dutch Finance Minister Jeroen Dijsselbloem’s cancellation of Thursday’s planned Eurogroup meeting may be a stumble but not a deathblow to negotiations around the third Greek bailout.
POLITICO’s sources indicate that the next stage of agreement will likely be reached by mid-May. These latest delaying tactics are something seen before from both the Greeks and its creditors.
Greece has been accused of setting false deadlines, precisely in order to break them and look tough for a domestic audience. Meanwhile, after seven years of bailouts and negotiations, the creditors are not interested in a poor quality compromise.
As one Dutch government source told POLITICO: “We’re interested in quality over speed.”
Greek newspaper Kathimerini reported this morning that Greek Prime Minister Alexis Tsipras is expected to call European Council President Donald Tusk today to ask for an extraordinary EU leaders’ summit to discuss the Greek program “as the Syriza leader feels that Athens has met its bailout commitments and that the lenders’ side is standing in the way of an agreement.”
But Tusk appeared to rule out a summit. Speaking after a meeting with the Albanian president in Brussels, he said: “Earlier today I talked to Prime Minister Tsipras. I am convinced that there is still more work to be done by the ministers of finance … Therefore, we need a specific date for the new Eurogroup meeting in the not distant future, and I am not talking about weeks but about days.
The headline numbers under dispute are relatively small: Greece and its lenders are fighting over €3.6 billion in “contingency” austerity measures. However, it’s the contingency nature of the measures that is contested.
Greece Faces New IMF Curveball to Unlock Aid: Scenarios
Bloomberg/Nikos Chrysoloras and Jonathan Stearns
Greek Prime Minister Alexis Tsipras has promised voters he’ll reject even one euro cent more of budget austerity than is needed under the country’s bailout. Greece’s international creditors say the program’s requirements may include 3.5 billion euros ($3.9 billion) in extra fiscal tightening he hadn’t bargained for.
The demand by the euro area and the International Monetary Fund is a potential bombshell for the government, raising the threat of renewed instability in Greece.
Tsipras rode to power in January 2015 railing against austerity and nearly steered Greece out of the euro before flip-flopping last summer to secure the nation’s third bailout in six years.
Since then the Greek economy has slipped back into recession, unemployment has stayed stubbornly high at around 25 percent and public support for the euro has weakened.
Just like last year, Tsipras needs financial aid to avoid defaulting on payments to the European Central Bank that come due in three months time.
The prime minister’s current dilemma stems from a disagreement between the euro area and the IMF. While the European creditors say the government in Athens has committed to enough austerity to reach the targeted budget surplus before interest payments of 3.5 percent of gross domestic product in 2018, the IMF projects current Greek measures will produce an excess of just 1.5 percent.
With Germany insisting on continued IMF involvement in the Greek aid program, the conflicting forecasts have led the creditors as a whole to call for “contingency measures” equal to 2 percent of GDP. These would kick in should the government in Athens stray off its budgetary course as the IMF projects.
So Tsipras and Finance Minister Euclid Tsakalotos face the delicate task of drawing up measures that can satisfy the creditors without breaking apart their coalition with the nationalist Independent Greeks.
That balancing act would be a challenge for any Greek government, let alone one with an anti-austerity base, a deep dislike of the Washington-based IMF and a three-seat majority in parliament.