Wednesday, May 27, 2015

Varoufakis demands creditors 'get their act together' as Greeks cling to 'impossible' promises

By Peter Spence, Economics Correspondent 26 May 2015

The euro has slipped by more than 0.7pc against the dollar as traders digest conflicting messages from the country’s officials

Yanis Varoufakis has called on Greece's creditors to "get their act together" Photo: Kostas Tsironis/Bloomberg 

Yanis Varoufakis, the Greek finance minister, said on Tuesday that the country’s creditors must “get their act together” as loan deadlines approach for the embattled country.
The government has until Friday to pay public sector salaries, a week before the first of a string of repayments to the International Monetary Fund, totalling around €1.6bn (£1.1bn) in June alone, must be paid. 

Nikos Voutsis, the Greek minister of the interior, said on Sunday that “this money will not be given and is not there to be given”. But on Tuesday Mr Varoufakis insisted that “we will make the payment because I have no doubt that we will have an agreement”. 

The euro slipped by more than 0.7pc against the dollar, as traders digested these conflicting messages from the country’s left-wing Syriza officials. 

Kit Juckes, of Societe Generale, said: “The Greek government will need some form of deal in order to release further funds if it is to avoid missing payments to the IMF in June.”
He added: “Whether Greek prime minister Alexis Tsipras can negotiate a deal that is acceptable to enough MPs of his party isn't clear and markets are once again, very edgy.” 

Over the weekend, a slim majority of Syriza's central committee voted for Mr Tsipras's potential compromise agreement. These included "red lines" on pensions and labour reform. Holger Schmieding, chief economist at Berenberg, said that this was a package "lenders cannot accept". 

Mr Schmieding said that Mr Tsipras had made "impossible promises" during his election campaign. The prime minister "still refuses to get real and strike the kind of deal that could end the recession and unlock the money needed to keep Greece afloat," he added. 

However, in a further indication of the fine line Mr Tsipras must tread, a large group of Syriza members voted for a counter proposal, which openly raised the prospect of returning to the drachma. 

Mr Schmieding said: "Greece does not seem to have sufficient funds to make all four June IMF instalments." 

Talking about the €300m payment due to be made to the IMF on June 5, Gabriel Sakellaridis, a Greek government spokesman, said on Monday: “To the extent that we are able to pay, we will keep on repaying these obligations.” 

An unnamed German official, speaking to Reuters, said: “I find it encouraging, if it is true, that the Greeks signalled yesterday their desire to repay the €300m.” He added: “I find it encouraging because it means that Greece has understood that without the IMF this won't work.” 

“I think there is reason to believe that we will not be talking about a default situation around June 5, neither before or immediately thereafter,” he continued, on condition of anonymity.
Mr Varoufakis has said that at some point the Greek government would have to make a choice between paying salaries and paying international creditors. 

The decision is one “that no minister of finance should ever have to make”, Mr Varoufakis said, adding: “And of course the choice that makes under those circumstances is clear cut, isn’t it?" This was widely seen as an indication creditors would be left empty handed. 

Mr Schmieding said: "Once a payment is missed, the risk of escalating trouble, such as open bank runs and major political upheaval in Athens, will rise."
Varoufakis demands creditors 'get their act together' as Greeks cling to 'impossible' promises - Telegraph