Thursday, June 11, 2015

Merkel's Germany offers up 'one reform' deal to embattled Greece

By Peter Spence, Economics Correspondent 10 June 2015

Germany might accept just one large reform from Greece's leaders to unlock vital bail-out funds

Angela Merkel (L), Germany's chancellor, and Greek Prime Minister Alexis Tsipras Photo: AP Photo/Geert Vanden Wijngaert

Negotiations between Greece and its creditors finally appeared to make progress on Wednesday, as Germany put a deal on the table which Athens' leaders could be able to accept.

Germany’s negotiators - who until now have been seen to block progress in Greece’s debt talks - might now willing to accept just one large reform from the debt-ridden country to unlock a further tranche of aid, according to Bloomberg sources.

They said that the Greek government might deploy just one major overhaul if it wants to receive further support from its trio of lenders, the European Central Bank (ECB), International Monetary Fund, and the European Union.

One person said that if Greece moved quickly, funds could be available for the embattled economy as early as July. Greece has until June 30 before its current bailout programme will expire.

Greek stocks rallied for a second day, climbing by close to 1.1pc as investors bet that the country might finally move past a standoff with its creditors.

“Where there’s a will, there’s a way,” Angela Merkel, the German Chancellor, said in Brussels. “The goal is to keep Greece in the euro area.”

She added that Alexis Tsipras, the Greek leader, must carry through reforms if the country is to receive the final €7.2bn sum of aid it needs.

Pierre Moscovici, the EU's economic affairs commissioner, said that he thought "more than ever" that a Greek debt deal was possible. "A deal is possible if the political will is shared by all," he said.

Ms Merkel has appeared more ready to appease Greece’s negotiating team than her colleague Wolfgang Schaeuble, the German finance minister.

By contrast, Mr Schaeuble has appeared more willing to accept a Greek default, and departure from the Eurozone, commonly referred to as ‘Grexit’.

Many European leaders have urged negotiators to reach a conclusion that will keep Greece within the Eurozone, perhaps fearing that a Grexit could lead to an unravelling of the wider single currency project.

Francois Hollande, the French President, said: "Let's work, go fast and conclude."

He said that negotiators should avoid a deal that "would be bad for Greece, for the European Union and for the Eurozone". "We must be quick. We must not let things drag out," he added.

Greece faces several debt deadlines over the summer, which Bank of America Merrill Lynch said will total around €10bn. It is not expected to be able to pay these if a deal cannot be struck with its creditors.

• Greece inches closer to a deal with fresh proposals
• Greece told to strike a deal or face 'dramatic consequences'
• Greek PM faces revolt from his own Left-wing over bail-out crisis

The ECB reportedly provided extra liquidity to the Greek economy on Wednesday, as deposits have continued to leave the debt-ridden economy.

The central bank reportedly upped its emergency liquidity assistance (ELA) from €80.7bn to €83bn, a move that could keep the domestic economy afloat as Greeks continue to pull their cash from the country.

Yves Mersch, a member of the ECB's executive board, has said that the provision of ELA "has to be weighed against the risk of overturning the entire Greek financial system".

"The risk of saying no would be to plunge a whole financial system into chaos," he said.

Greece's economic problems have led to social unrest

Creditors seemed to have dismissed an earlier proposal from Greek negotiators, on the basis that the terms offered were “insufficient”, offering weaker austerity than had been agreed in previous talks.

Margaritis Schinas, a spokesman for the European Commission, said that the body believes “the ball is clearly now in the court of the Greek government”, which needs to offer up the more stringent austerity measures it had previously agreed to.

“The latest suggestions [from Greek negotiators] do not reflect the state of discussions between Mr Tsipras and Mr Juncker,” Mr Schinas said. Asked to elaborate, he added that the newest proposals from Greek politicians did not meet agreed demands on primary surplus targets, pensions and VAT.

Michala Marcussen, of Societe Generale, said that it was “not a surprise” that the Greek proposals were rejected. “The document contained a chapter on debt relief, which is off the table until the effective implementation of measures by the Greek government,” she said.

Merkel's Germany offers up 'one reform' deal to embattled Greece - Telegraph