Greek PM forecasts 'happy end'; Eurogroup chief cites progress in talks

By Reuters

May 09, 2015 07:47 AM EDT

Greek Prime Minister Alexis Tsipras forecast a happy end soon to fraught negotiations with creditors on a cash-for-reform deal, and the chairman of euro zone finance ministers said talks were making progress, though not enough for a deal next Monday.

However, with Greece's cash reserves dwindling, EU officials said there was no breakthrough in talks with the International Monetary Fund, the European Commission and the European Central Bank on sticking points such as pension and labor market reforms and budget targets.

"The organization and structure of the talks has improved, compared to what it was before, but we are still quite some way away from a situation that you could describe as a final agreement being well in sight," a senior euro zone official said.

Greece's leftist-led government, which was elected earlier this year on promises to end austerity policies, has dragged its feet on accepting unpopular reforms promised by a previous government under the country's EU/IMF bailout program.

The country faces the risk of defaulting on debt repayments and being forced out of the euro zone, but negotiations have moved so slowly that the lenders have ruled out an agreement at next Monday's meeting of euro zone finance ministers.

Tsipras, who has taken personal charge of the negotiations, told parliament in Athens: "I am confident that we will soon have a happy ending and that despite the difficulties... we will carry out the agreement which will be concluded soon in Europe."

The leftist leader said his government was "doing whatever it should in order to reach ... an honest and mutually beneficial agreement with our partners", but gave no indication of yielding on the lenders' core demands for painful reforms.

The government has said its "red lines" are that it will not make further pension cuts or legislate to ease layoffs in the private sector. It has given some ground on privatizations and value-added tax but wide gaps remain.

Eurogroup chairman Jeroen Dijsselbloem said Monday's meeting would not be decisive, but negotiations were moving forward. Greece's partners would consider debt relief only once Athens committed to, and completed its current bailout program, he said.

EU officials said they are keen for the Eurogroup to send a positive message on Monday that a deal is in the works and avoid another clash with Greek Finance Minister Yanis Varoufakis like one at a meeting in Riga last month.

"I cannot exclude that ministers will issue a statement, but if it appears, it is likely to be anodyne, taking stock, etc," the senior euro zone official said.

That would not be enough to prompt the ECB to allow Greek banks on emergency liquidity support to buy more short-term treasury bills to ease the government's funding crunch.

The official said Athens has easily enough money left to pay a crucial 750 million euro debt installment to the IMF on Tuesday and meet other payment obligations in May.

Another EU official said it was essential to reach a deal by the end of May to allow time for some parliaments to approve the agreement and authorize disbursement of 7.2 billion euros left in Greece's existing bailout, which expires at the end of June.

In Athens, the top U.S. energy diplomat tried to persuade Greek officials to focus on a Western-backed pipeline project rather than a rival Russian gas pipeline that the Tsipras government is discussing with Moscow, lured by the prospect of advance payments of profits.


ECB policymaker Ewald Nowotny told Reuters that imposing controls restricting cash withdrawals from Greek banks and the movement of capital might be needed if the talks failed.

"They can be applied only in very special circumstances," the Austrian central bank chief said in an interview, citing the example of Cyprus. "They might be helpful as a temporary measure in some extreme circumstances."

As so often since the euro zone's debt crisis began in 2010, much hinges on the position of Germany, the EU's main paymaster and Greece's biggest creditor nation.

Tsipras has spoken by telephone to Chancellor Angela Merkel several times this week, a German government spokeswoman said, most recently on Wednesday night. He gave no details.

A source briefed on German government thinking said Merkel was willing to take a deal to continue financial support for Greece to an increasingly skeptical parliament provided Tsipras made serious commitments on reform.

The source said Finance Minister Wolfgang Schaeuble and a growing number of lawmakers in Merkel's conservative CDU party were skeptical about Greece's ability to stay in the euro zone.

Another hurdle may lie in Finland, where the head of a Eurosceptic party who has agreed to enter a new governing coalition said it would make sense for Greece to leave the common currency.

Timo Soini, leader of the Finns Party and possible next finance minister, declined to comment in a television interview on what position the next government would take on a third Greek bailout, saying that in a coalition "no one dictates nothing".

Asked whether he would still like to see Greece thrown out of the euro zone, he said: "That would perhaps be the clearest option for everybody, also for the Greeks."

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