ECONOMY

Greece, creditors haven’t discussed ‘plan B,’ official says

Greece and its creditors haven’t discussed having the country miss a payment to the International Monetary Fund or default as agreement over bailout disbursements remains beyond reach, a senior Greek government official said.

If Prime Minister Alexis Tsipras meets with German Chancellor Angela Merkel during a European summit on migration in Brussels on Thursday, he will tell her that Greece has done its part and an accord could be agreed upon this month, the person said, speaking on the condition of anonymity.

Failure to find a consensus would be viewed in Greece as a political event and would have to be dealt with in a political manner, the person said, when asked about the prospect of snap elections or a referendum. Such scenarios are viewed as being hypothetical and not part of the government agenda, the person said.

Talks on Friday will shift to Riga, Latvia, where euro-area finance ministers will attempt to persuade Greece to commit to economic reforms so that aid payments can be released before the country runs out of money.

“The Greek government has got to show some backbone in its reform efforts,” European Union Economic and Monetary Commissioner Pierre Moscovici said on Thursday. “Time is of the essence and it’s really an urgent matter.”

Bonds Rise

Greek stocks and bonds rose for a second day on Thursday. The yield on three-year government bonds fell 54 basis points to 27.08 percent at 1:18 p.m. local time, while the Athens Stock Exchange General Index rose about 2 percent.

In an effort to avert a breakdown in communication, Tsipras’s office and leaders of creditor institutions have established a hotline for direct contact, according to two people familiar with the matter.

The hotline group is comprised of Greek Minister of State Nikos Pappas, EU Commission President Jean-Claude Juncker’s economic adviser, Luc Tholoniat, European Central Bank Executive Board Member Benoit Coeure, and the IMF’s Europe Director Poul Thomsen. The group is in regular contact and acts to avert crises and resolve disputes, according to one of the officials. Its first meeting was on March 26.

Merkel signaled on Wednesday that she won’t back off on Germany’s insistence on “reforms in combination with solid finances” in the euro area. Germany “will continue to call for this course of action, even though we sometimes face considerable pressure internationally,” she said at an event in Berlin, without mentioning Greece.

Drain Deposits

Earlier this week, Tsipras ordered local governments to move their funds to the central bank. The move will help him meet end-of-month salary and pension payments, though it will also further drain commercial banks of their deposits.

Euro-area finance ministry officials expressed doubts during a Wednesday call about whether Greece’s incremental progress would be enough to unlock emergency loans, according to two people familiar with the matter. Greece’s refusal to privatize state assets, change its pension system and deregulate the labor market were the main stumbling blocs, one of the people said.

The people asked not to be identified because the content of Euro Working Group discussions isn’t public.

Greek Finance Minister Yanis Varoufakis said on Tuesday that, while there was a clear convergence of views between the sides, the Latvian meeting is too soon to seal an agreement. The best chance for success is an accord that leaves all parties somewhat unsatisfied, as a failure would be “catastrophic,” he said in Athens.

[Bloomberg]