Greece and lenders discuss new way to reach agreement
Greek officials were locked in talks with the country’s lenders over the weekend, with both sides having proposals on how a deal to unlock further bailout funding could be reached.
Deputy Prime Minister Yiannis Dragasakis, State Minister Nikos Pappas and Alternate Minister for International Economic Relations Euclid Tsakalotos traveled to Brussels, where they met with a representative of European Commission President Jean-Claude Juncker on Saturday.
Greece is thought to be proposing a nine-month extension of its program and for the European Stability Mechanism to provide up to 27 billion euros for Athens to buy back the Greek bonds held by the European Central Bank so it could withdraw them and reduce its short-term funding needs.
However, the institutions do not appear interested in such a deal. Instead, they are believed to favor an extension of the bailout program until September, with money Greece has already borrowed for bank recapitalization being used to cover its funding needs over the summer. Athens had some 11 billion euros left over for this purpose but had to return it in February, when it signed the agreement for the current extension, which runs until the end of the month.
Creditors see some of this 11 billion euros (but not all, as banks could need further recapitalization) being used to cover its immediate needs, which include paying the International Monetary Fund 1.6 billion euros by the end of the month and covering two bonds worth 6.7 billion euros, which are held by the ECB and mature in July and August.
Government sources told Kathimerini that the delegation sent to Brussels was prepared to commit to cuts to higher pensions and public sector salaries, to introduce debt and deficit “brakes” through legislation and to create escrow accounts into which it will pay funds that can only be used to pay off public debt so there can be no doubts in the future about whether Greece has the money to pay its creditors.
Sources said the Greek government was also close to agreeing with its lenders on the primary surplus targets for the next years. The institutions are asking for 1 percent of GDP this year, 2 percent in 2016, 3 percent in 2017 and 3.5 percent from 2018 onwards. Athens is also said to be prepared to increase revenue from value-added tax to the lenders’ target of 1 percent of GDP.
