Bloomberg: Greece Holds Marathon Creditor Talks as Default Lurches Closer

Bloomberg: Η Ελλάδα πλησιάζει περισσότερο στη χρεοκοπία
by Ian Wishart Jonathan Stearns Corina Ruhe
Greece and its creditors are holding marathon emergency talks, struggling to break.......

a five-month impasse that has brought the country to the cusp of default as the end of its bailout program next Tuesday lurches ever closer.

Greek Prime Minister Alexis Tsipras, who is meeting round-the-clock in Brussels with the heads of his country’s three creditor institutions, will reconvene with them Thursday morning after concluding a series of discussions Wednesday that dragged on well into the night with no breakthrough in sight.

European officials said the talks have yielded little as the Greek government holds firm in its positions. 

Wednesday brought a series of dueling proposals and rejections from both sides, leaving Greece without an agreement ensuring it can meet a payment of 1.5 billion euros ($1.7 billion) to the International Monetary Fund that falls due on June 30, the same day that the bailout expires. Sticking points range from pensions and sales tax increases to debt relief.

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Along with Tsipras’s talks with IMF chief Christine Lagarde, European Central Bank President Mario Draghi and European Commission President Jean-Claude Juncker, euro-area finance chiefs are also in Brussels trying to find a way to broker a deal that will satisfy all sides.

“It’s going to the wire,” Finland’s Alexander Stubb told reporters after a meeting of euro-area finance chiefs in Brussels ended Wednesday. Ministers will resume Thursday afternoon, by which time “we hope to have a concrete proposal. It’s important to keep the process going.”

Stocks Retreat

The impasse caught investors off guard and stocks retreated around the globe amid concern the five-month Greek standoff will fester, with disagreement persisting over the conditions attached to a resumption of aid for Europe’s most indebted nation.

Equities and bonds surged earlier in the week after a round of Greek proposals showed that Tsipras was finally starting to negotiate. That changed Wednesday when the creditors rejected elements of the Greek pitch, sparking incredulity from Tsipras, who is under increasing pressure from his own lawmakers not to give away too much.

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The benchmark Athens Stock Exchange Index fell Wednesday for the first time in five days, dropping 1.8 percent. The index is up 13.6 percent this week.

Still, Tsipras is taking a lead role in the talks and that is a good sign that an agreement could be reached, said Jacob Funk Kirkegaard, a senior fellow at the Peterson Institute for International Economics in Washington.

Capital Controls

Failure to close a deal by the weekend would increase the chance that Greece would have to impose capital controls to prevent a run on its banks. Greeks have withdrawn about 20 percent of deposits held by the nation’s lenders this year as concern of an exit from the euro intensified.

“This was always going to be a tough negotiation that was going to require the direct participation of Prime Minister Tsipras,” Kirkegaard said on Thursday in an interview with Bloomberg Television. “I think we’ll get a deal, the only question is whether or not the deal will come before or after capital controls are potentially imposed on Greece.”

The talks come ahead of a two-day summit of European Union leaders beginning later Thursday in Brussels.

Even if he pulls off a deal with creditors, Tsipras may struggle to secure the needed endorsement of the Greek parliament as some of the more populist and radical members of his ruling Syriza party are threatening to vote against the compromise plan he offered creditors this week.

The lower house of the German parliament, which must sign off on any accord, won’t cast its vote on a revised aid plan until after Greek lawmakers pass economic policy changes. Germany could vote Monday or Tuesday, provided Greece approves the deal first, a German parliament official said.

Source: bloomberg.com/europe