PM speaks to Merkel, Hollande as lenders increase pressure

With negotiations between Greece and its creditors at a critical phase, Prime Minister Alexis Tsipras on Thursday sought the assistance of German Chancellor Angela Merkel and French President Francois Hollande in a teleconference call.

The three leaders spoke for about an hour and government sources referred to “a positive climate.” The exact content of the conversation remained unclear but it is thought Tsipras asked Merkel and Hollande to make good on a pledge they made at an EU leaders’ summit in Riga last week to help overcome potential obstacles in the negotiations.

The desire in Athens to seek another intervention at the political level came as technical talks appear to be moving slowly despite claims by Greek officials on Wednesday that an agreement was all but in the bag.

In comments to reporters on Thursday, government spokesman Gavriil Sakellaridis said he believed a deal would be reached soon, noting that the government’s optimism was not “hot air” but “based on specific information, the experience of the past few weeks and the progress that has been achieved.” Asked about reports according to which the potential risk of contagion from a Greek default has been reduced, Sakellaridis said such a development “would have broader consequences and on factors that do not only relate to the economy but to the very essence of the European Union, with political issues, with geopolitical issues.”

Sources said that during a Euro Working Group teleconference on Thursday, Greece’s representative, Giorgos Houliarakis, was advised that unless Athens can reach an agreement with the institutions in the next few days there may not be enough time for eurozone parliaments to approve a deal before the end of June and ensure there is a disbursement. If Greece does not receive a new bailout tranche, it risks defaulting next month, when it has some 1.5 billion euros to pay back to the International Monetary Fund.

Athens made a fresh proposal regarding new value-added tax rates at Thursday’s meeting of the Brussels Group with the aim of increasing revenues this year by 850 million euros, even though lenders are looking for a boost of 1.8 billion euros.

Sources said that the Greek government proposed a low rate of 6 to 6.5 percent for medicines, a medium rate of 10 to 11 percent for food, electricity and possibly tourism, and a top rate of 21 to 22 percent for all other goods and services. However, lenders are thought to favor just two rates and most items to be taxed at the top rate.

Talks are due to continue over the weekend, with the focus on this year’s fiscal gap, pension reforms and the liberalization of the product market.

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