NEWS

Greece creditors say no deal near as G-7 frustration vented

By Ian Wishart & Hans Nichols

Greece’s creditors said a deal to unlock rescue aid isn’t imminent as they demanded the debt-ravaged nation make stronger commitments to overhaul its economy.

The Greek government saw its optimism over an agreement rebuffed as European officials gathered in the German city of Dresden for a Group of Seven meeting and said much more effort is needed. Greece had claimed a solution could be reached by Sunday.

There is a “substantial way to go,” European economic commissioner Pierre Moscovici said in a Bloomberg television interview on Friday. “I wouldn’t give a day for a deadline. There have been some deadlines in the past, and there we are today. But it’s clear that we need to speed up, that time is running short.”

With time and patience running out, the Mediterranean nation hasn’t yet said how it will pay almost 1.6 billion euros ($1.74 billion) in International Monetary Fund payments scheduled for next month, with the first transfer due June 5.

International creditors said they need an agreement on an economic plan next week to be able to release funds before Greece’s current loan arrangement expires at the end of June, according to a European Union official who spoke on condition of anonymity. Moscovici said that needs to be settled before any third bailout can be dealt with.

Telephone Call

“The Commission has a very systematic approach,” he said. “We first need to close the review of the second program, to conclude the program, and then we’ll be capable of talking about further arrangements. Let’s not confuse those two problems.”

In a sign of growing concern at the state of the negotiations, Greek PM Alexis Tsipras held a one-hour call with German Chancellor Angela Merkel and French President Francois Hollande, according to a Greek government official.

Frustration over Greece’s statements prompted delegates in Dresden to diverge from the day’s main agenda of economic growth and international tax rules to say the cash-strapped country hasn’t done enough.

The IMF won’t support a bailout accord with Greece unless the nation commits to a credible medium-term primary budget surplus and changes to its pension system, said a separate official involved in the G-7 talks. Greece and its international creditors remain far apart, said the official, who spoke to reporters on condition of anonymity because the discussions are confidential.

While Tsipras must make binding commitments, euro-area countries may also need to offer debt relief as part of any solution, the official said.

Capital Controls

“I would not say that we have achieved results, that we are close to the end of the process,” IMF Managing Director Christine Lagarde said on Thursday in a television interview with ARD from Dresden. “There is still a lot of work to be done.”

There is a 40 percent chance that Greece will fail to reach a deal and miss a payment to the IMF next month, forcing the government to impose capital controls, according to George Saravelos, foreign-exchange strategist at Deutsche Bank AG in London. Greece could still miss a payment even if it reaches agreement because time is so tight, he said in a note to clients.

All of this runs counter to the Greek government’s view. Officials there have said an agreement with the IMF and the country’s European creditors could be hammered out by the end of the week.

“This optimism is not just words,” Gabriel Sakellaridis, the Greek government’s chief spokesman, told reporters on Thursday. “It is based on the experience of the previous weeks and the progress achieved.”

‘Right Direction’

Nouriel Roubini, chairman of Roubini Global Economics, shared some of that optimism. He was in Dresden as part of a symposium in which Nobel Prize-winning economists discussed options for boosting growth with the G-7 delegates.

“I see a sense of something more constructive, of moving in the right direction,” he said in a Bloomberg Television interview. “I do expect that pots of money are going to be found in June to make sure that the” IMF is going to be paid.

Under IMF policy, Greece can bundle the four payments due next month and make them all together on June 19. IMF spokesman William Murray said Thursday that Greece hasn’t requested a bundling of payments. Greece owes the IMF $334 million on June 5 and three payments totaling $1.4 billion

With negotiations between Greece and its creditor institutions continuing in Brussels, euro-area finance ministry officials held a call on Thursday to discuss progress.

“It’s like two people are playing chess with each other,” Yale University professor Robert Shiller said in a Bloomberg TV interview before attending the G-7. “My guess is that this will be resolved in the last minute and Greece won’t default.”

[Bloomberg]

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