World Press View: Greece Running Into Brick Wall

While some optimism is creeping in a deal will be reached, Greece's refusal to impose more austerity has set off worries it won't, world press reports say.

While some optimism is creeping in a deal will be reached, Greece’s refusal to impose more austerity has set off worries it won’t, world press reports say.

Some excerpts:

SYRIZA Still Insisting On Same Red Lines

Forbes – Tim Worstall

We were all rather hoping that the intensive negotiations over the weekend would produce something of a breakthrough in the Greek debt deadlock.

But if today’s reports are to be believed that’s not quite what has happened. Syriza, negotiating for Greece, is still insisting upon the same red lines that must not be crossed they were insisting upon three months ago.

And those are the very red lines that the Eurogroup, negotiating on behalf of the creditors, insists must be crossed. Specifically, they are insisting that the welfare state must be made more generous, something entirely unacceptable to the other side.

Well, this is the thing you see. The Eurogroup and the IMF see the straightened circumstances of Greece as an opportunity to enforce some needed microeconomic reforms on the country. It’s not just a matter of running a large enough primary surplus to pay off the debt.

They’re also thinking that certain basic reforms to how the labour market works are desirable. Desirable to the extent that they’re willing to use the need for cash to avoid default to insist on their taking place. Maybe that’s fair and reasonable and maybe it’s not.

But the problem it runs up against is that some of those reforms are things that Syriza has specifically stated that it doesn’t want to do.rely unacceptable to the creditor side.

Greece Targets May Deal, Breakthrough Remains Elusive

Bloomberg – Nikos Chrysoloras, Jeff Black, Marcus Bensasson

Greece is still far from an agreement with its international creditors as Prime Minister Alexis Tsipras tries to persuade officials to ease the flow of liquidity to the country.

Three days before the European Central Bank’s next decision on emergency aid, gaps remain on issues ranging from fiscal forecasts to labor and pension reforms, three people familiar with the talks said.

Still, progress has been made in an improved atmosphere and Greece should have the cash to make a 200-million-euro ($223 million) payment to the International Monetary Fund this week, officials said.

“We believe our red lines are for the benefit of the economy and society,” Greek government spokesman Gabriel Sakellaridis told reporters in Athens today. Progress in talks should be accompanied by easier liquidity terms as no reforms can be done under a cash crunch, he said.

The fiscal noose is tightening on Greece after weeks of brinkmanship and Prime Minister Alexis Tsipras needs to show European officials that he’s willing to find a compromise.

Failure to do so could prompt the ECB to raise the haircut it demands on Greek collateral as soon as May 6, a decision which would risk pushing the country further toward financial chaos and capital controls …

‘‘We continue to see a 70 percent probability that, possibly with quite some political noise in Athens in the meantime, Greece will strike a deal in the end and stay in the euro,’’ said Holger Schmieding, chief economist at Berenberg Bank in London. At the same time, a deal in the next few days is unlikely, he said.

Markets Waver as Greece Teeters

The Australian Financial Review – Karen Maley

Financial markets will be on edge this week as investors wait to see how much longer Athens can continue to stave off default, even as the Greek economy grinds to a halt, government coffers empty and the slow-motion bank run shows no sign of abating.

Greece’s Prime Minister, Alexis Tsipras appears hopeful that within the next week, his country will be able to reach an agreement with its creditors – the International Monetary Fund, the European Central Bank and the European Union – thereby giving the country access to the €7.2 billion ($10.3 billion) left in its bailout package.

The timing is critical because Greece faces debt payments of around €1 billion to the International Monetary Fund by May 12.

But Brussels is less optimistic. After all, negotiations with Tsipras’s radical leftist government have already dragged on for three months.

Last week, Greece’s creditors rejected Athens’ latest list of fiscal and structural reforms – at least the fifth proposed since Tsipras’s Syriza party came to power in late January – because they considered it incomplete and lacking in substance.

Greece’s creditors would like the Tsipras government to begin with the reform program that Greece agreed to in exchange for its bailout two years ago, and to then go through, line by line, stating the measures it would retain, those it would replace, and what effect this would have on the budget bottom-line.

But this is an enormous task for a relatively new government that has flatly refused to endorse the terms of the bailout negotiated under the country’s previous centre-right government …

Although some European politicians are in favour of allowing Greece to default, Paris and Berlin are fearful that “Grexit” risks destabilising the euro zone and encouraging speculators to target vulnerable countries such as Italy, Portugal or Belgium.

For his part, Tsipras is betting that worries about the potential disruption from a “Grexit” will eventually cause the Europeans to back away from their demands for further reforms. Still, it’s a dangerous strategy, because in Greece’s precarious position, a financial accident could occur at any time.