Greece faces a weekend of intensive negotiations to tie up a bailout of 86 billion euros ($93 billion) in time to meet its debt obligations for this month, as German lawmakers cautioned against rushing to strike a deal.
Greece and its creditors have set a Monday target to complete the so-called memorandum of understanding that sets out the budget-austerity and economic-overhaul conditions required for a third rescue, according to three officials with knowledge of the discussions who asked not to be named because they are private.
Talks are entering a crucial phase since without an agreement by the beginning of next week, Greece will have to seek another bridge loan to pay a 3.2 billion-euro debt due to the European Central Bank Aug. 20, one of the officials said. If a deal emerges, Greece will be in line for an initial tranche of more than 20 billion euros, comprising 7 billion euros to cover a previous rescue loan, a buffer for Greek banks of 10 billion euros, plus the ECB payment, the official said.
“Our experts on the ground are working on the text of the memorandum of understanding,” European Commission spokeswoman Mina Andreeva told reporters in Brussels on Friday. “We are trying to make swift progress in order to have a deal, preferably before Aug. 20.”
The race to secure financing for Greece doesn’t threaten a repeat of the drama of earlier this summer, when all-night summits, a Greek referendum and defections from Prime Minister Alexis Tsipras’s Syriza party threatened to break up the 19- nation euro. Even without an imminent bailout agreement, the European fund deployed in July to help Greece clear arrears still contains about 5 billion euros and could be tapped again for a bridge loan.
The negotiations are still exposing Europe’s divisions less than four weeks after leaders hammered out a deal to keep Greece in the euro. While French President Francois Hollande agreed the talks can be completed by Aug. 20, members of Chancellor Angela Merkel’s bloc are skeptical that timeframe is realistic.
“We don’t believe that this will be decided in time,” Hans Michelbach, a Bavarian lawmaker who has argued against a deal with Greece, said in a phone interview. “I assume that bridge financing will be necessary.”
Germany’s Finance Ministry still sees a number of issues to be resolved between the Greek government and its creditors in the ECB, the International Monetary Fund, the commission and the European Stability Mechanism rescue fund, a German official said. Among them are the upfront reform measures that Greece must undertake before winning funds, according to the official.
Assuming Greece’s goal of wrapping up discussions by Aug. 10 is met, legislation would then be submitted to the country’s parliament by Aug. 14, according to a senior Greek Finance Ministry official. Euro-area finance ministers may discuss progress on Greece the same day, with national parliaments including the German lower house, the Bundestag, slated to reconvene in the following week to approve the bailout.
“It would be a significant surprise” if that timetable was adhered to, said Malcolm Barr, an economist at JPMorgan Chase & Co. in London. “The discussions on the design of the third program will be very difficult.”