Creditors near bailout offer for Greece

Financial Times Financial Times
June 2, 2015

Leaders from Greece’s three bailout creditors narrowed their differences over what Athens needs to accomplish in order to access €7.2bn in desperately-needed bailout aid at an emergency meeting in Berlin Monday night.

Those leaders have left it to technical experts to hammer out a final text they want to present to Alexis Tsipras, the Greek prime minister, as the basis of a political agreement they are hoping to reach by the end of the week.

According to officials briefed on the Berlin discussions, differences still exist between the International Monetary Fund and the European Commission over whether Greece can hit ambitious budget surplus targets to be included in an agreed text.

The IMF remains sceptical and continues to seek assurances that eurozone governments would agree to restructure Greek debt — mostly now held by EU creditors — if a credible reform programme is not agreed and the targets are not met.

“[There was] at least a meeting of the texts; minds are probably further apart,” said one senior eurozone official.

Still, the talks produced the most important turning point in the ongoing Greek crisis in more than three months, with officials hoping a final text outlining what is expected from Athens can be agreed by the end of the day Tuesday.

Officials must then decide whether hey present their proposal to Mr Tsipras’ government during a meeting in person or during a teleconference. Either way, officials are hoping a political agreement on principles can be hammered out before Athens is faced with a €300m loan repayment to the IMF on Friday.

Over the course of the following two weeks, Greece owes the IMF an additional €1.2bn, and eurozone officials hope a full staff-level agreement — which will include a more detailed delineation of what economic reforms Athens must quickly adopt — is agreed by the end of next week.

Several euroznoe officials remain concerned that despite a potential agreement among Greece’s three bailout monitors — the IMF, European Commission and European Central Bank — Greece may still be unwilling to accept the common position. Officials say the text will include measures that Greece has not yet agreed to, and that differences between Athens and eurozone creditors remain large.

Separately from the Berlin discussions, creditors are weighing a plan to carry Greece through the summer because time has run out to agree to a new bailout deal once the current one expires at the end of the month.

One leading plan under consideration would be to extend the existing bailout through the summer even after the current deal is reached so that the ECB can continue to provide cheap emergency loans to the Greek banking system.

In addition, €10.9bn in bailout funds that had been set aside for Greek bank recapitalisations would be “repurposed” as conventional bailout aid, which Athens could then use to meet two huge bond repayments owed in July in August.

Both payments are owed to the ECB, which holds the Greek bonds; the first payment is €3.5bn while the second is €3.2bn.