Wednesday, June 3, 2015

Greece and creditors still at odds as country slides towards abyss

By Szu Ping Chan 02 June 2015

Jeroen Dijsselbloem, head of the Euro group of finance ministers, says deal unlikely this week as creditors will not meet Greece "half way" while Syriza vows never to "succumb to blackmail"

The head of the Euro group has dashed hopes of an imminent deal between Greece and its creditors, saying on Tuesday that the two sides had not made enough progress to announce a agreement this week.

Jeroen Dijsselbloem, head of the Eurozone's group of finance ministers, said that while there had been progress in recent days, it was "still not sufficient" to "meet the economic conditions" of an agreement.

“As long as it doesn’t meet economic conditions, we can’t come to an agreement," he told Dutch financial news station RTLZ. “It’s not right to think that we can meet half way".

Mr Dijsselbloem said he believed a Greek deal was still possible, and that he wanted to help pull Greece back from the "abyss".

Greece has submitted a plan to European creditors that it hopes will unlock vital bail-out funds and secure the country's position in the Eurozone.

Prime minister Alexis Tsipras said the government had submitted realistic proposals that included "tough compromises".

Speaking on state television on Tuesday morning, Mr Tsipras said negotiations with European creditors had been hard, but that the government remained committed to a deal that would ensure Greece's youth "thrived".

Mr Tsipras said the proposals, about which he did not give any details, showed the Syriza-led coalition was standing up for the country's rights for the first time. He added that the decision on a deal now lay with Greece's creditors.


However, Greek ministers vowed that the country would not "succumb to blackmail" in their quest to unlock a fresh €7.2bn tranche of rescue funds.

In a series of tweets on Tuesday morning, Yannis Dragasakis, Greece's deputy prime minister, said that Greece was committed to balancing its books before taking into account debt payments. But he added that any agreement must allow for a primary surplus of less than 1pc of GDP in 2015 and less than 1.5pc next year.

He also called for a "roadmap" leading to sustainability of Greek debt and said the population would not be able to withstand another round of austerity.

"We will not accept ultimatums nor succumb to blackmail," he tweeted.

Europe's top policymakers, including German chancellor Angela Merkel; Francois Hollande, the president of France; and Mario Draghi, the head of the European Central Bank, held an emergency meeting in Berlin last night to discuss a deal.

The euro surged by more than a cent against the dollar, to $1.1056, after policymakers suggested that an agreement between Greece and its creditors was within reach.

The leaders, which also included Jean-Claude Juncker, the head of the European Commission, and Christine Lagarde, the managing director of the International Monetary Fund, were shown a technical paper last night outlining possible ways to reach a deal, according to the Financial Times.

Mr Tsipras said he had not received a draft agreement from the European leaders. “We are not waiting for them to submit their own plan back to us,” Mr Tsipras told reporters on Tuesday. “Greece is the one that submits the plan.”

Pierre Moscovici, European Commissioner for Economic and Financial Affairs, said talks were "bearing fruit".

"The discussions are fruitful, they are bearing fruit, there is real progress with a better understanding by both the Greek government and its creditors,” Mr Moscovici told French radio. However, he conceded that efforts still had to be made "on both sides”.

“We are starting to work in depth on pensions. The Greek government has made some first proposals and the pros and cons are being considered,” he said, adding that negotiations continued on VAT reform. Pensions reform have long been considered one of the main stumbling blocks in negotiations between Greece and its creditors. Any movement on this issue would be seen as a significant breakthrough.

A spokesman for the EU said on Tuesday morning that European chief Jeroen Dijsselbloem remained in close contact with Greece as technical work continued to reach a deal. However, Annika Breidthardt said "we're not there yet" on Greece.

It is understood that European creditors were ready to offer Greece more debt relief - with the country's debt pile on course to hit 180pc of gross domestic product (GDP). However, policymakers were reportedly divided over the scale of relief that should be offered to Athens.

Paul Mason


Greece summary: no proposal emerged from Merkel-Lagarde-Draghi last night. Lenders at odds over whether/how much debt relief to give (1/2)

5:20 PM - 2 Jun 2015

Paul Mason


Greece (2/2)... absent proposal, argument within GR govt muted, with only Left Platform openly refuseniks. Scale of debt relief = critical.

5:22 PM - 2 Jun 2015

A Greek official said prime minister Alexis Tsipras had not heard from European leaders or Ms Lagarde following Monday night's meeting.

"He did not have any contact whatsoever with the leaders of the institutions," the official told Reuters, referring to the heads of the European Central Bank, the European Commission and the IMF.

German Chancellor Angela Merkel (front right), European Central Bank (ECB) President Mario Draghi (left), French President Francois Hollande (top right) and European Commission President Jean-Claude Juncker (top left) walk through the chancellery in Berlin on Monday (Photo: Reuters)

Greece is due to repay €300m to the IMF this week. It is understood that Athens has enough funds to make the payment.

German vice-Chancellor Sigmar Gabriel said on Tuesday that the consequences of a Greek bankruptcy would be "gigantic" for Europe.

Meanwhile, Greek manufacturing data showed the sector contracted for the ninth consecutive month in May.

Markit's manufacturing Purchasing Managers’ Index (PMI) stood at 48 last month. While this was higher than April’s 22-month low of 46.5, activity was still below the 50 level that divides growth from contraction.

Phil Smith, an Economist at Markit, which compiles the Greece Manufacturing PMI survey, said: “The manufacturing PMI continues to point to a downturn in the Greek economy. The weaker euro is driving up costs but businesses aren’t seeing the benefit of an increase in competitiveness, with the uncertainty that hangs over the country stifling demand.

"Greek manufacturers are feeling the pressure on all fronts, and have reverted back to retrenchment mode as a result, cutting jobs for the second month running in May.”

Greece and creditors still at odds as country slides towards abyss - Telegraph