Default prospect looms over Greek negotiations with EU, IMF

Default prospect looms over Greek negotiations with EU, IMF

Athens, May 27, 2015/ Independent Balkan News Agency

By Zacharias Petrou

As negotiations between the Greek government and the country’s creditors continue this week, there are four major sticking points preventing a deal: fiscal issues, pension and labor reforms and changes to value added tax rates.

While creditors have reportedly been pushing for the troika officials to return to Athens for talks directly with ministers, top officials also increased pressure on the Greek government on Tuesday to speed up the process.

The Euro Working Group is set to hold a teleconference call on Thursday to discuss Greece. This has not yet been officially confirmed. However, if the Euro Working Group does convene it will be a sign that a Eurogroup meeting will soon follow to seal a deal between Greece and creditors.

Greek newspaper Ta Nea reported Alexis Tsipras agreed with US Treasury Secretary, Jack Lew that the United States would intervene with the IMF so that Greece’s bailout is discussed at the G7 meeting.

According to the report, Tsipras promised that the Greek government would, in the meantime, do all that it can to have moved closer to an agreement with creditors so that it could pave the way for Mr. Lew to push the IMF for an immediate solution to the Greek issue.

Pressure

The head of the European Stability Mechanism Klaus Regling told Germany’s Bild newspaper on Tuesday that “even missing a payment to the IMF would be dangerous. That would have an effect on other lenders like us. On the other hand, the rescue fund can only extend loans when reforms are implemented. That is also the case now and that’s the only way Greece will be able to restore its economy’s fiscal health.”

According to Olivier Blanchard, the International Monetary Fund’s chief economist, the government must present “credible measures” if Greece is to regain a surplus, adding that “this is far from being the case at the moment.”

“The process is much better, the substance is improving but we’re not there yet,” EU Economic Affairs Commissioner Pierre Moscovici told journalists when asked about talks between Greece, the IMF, the ECB and the European Commission.

“We are aware of the liquidity problems in Greece, this is why it so important that the negotiations speed up,” he added.

Default

A senior German official told Reuters there was no reason to believe Greece would be in default after a 300 million euro payment to the IMF falls due on June 5.

In Berlin, a senior German official, speaking on condition of not being named, said: “I find it encouraging, if it is true, that the Greeks signaled yesterday their desire to repay the 300 million euros to the IMF on June 5. 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.”

“My impression after talking to a series of colleagues is that the feeling is growing that a default should be avoided,” European Commission President Jean-Claude Juncker told MNI news agency in an interview.

He added: “On the other hand all those I’ve spoken to are insisting on the involvement of the International Monetary Fund. No deal without the agreement of the IMF.”