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07/12/2016

Syriza MP: 5 June is Greece’s ‘moment of truth’

Euro & Finance

Syriza MP: 5 June is Greece’s ‘moment of truth’

Nikos Filis

[Left.gr]

Greece cannot make an upcoming payment to the International Monetary Fund on 5 June, unless foreign lenders disburse more aid, a senior ruling party lawmaker said on Wednesday, the latest warning from Athens it is on the verge of default.

Prime Minister Alexis Tsipras’s leftist government says it hopes to reach a cash-for-reforms deal in days, although European Union and IMF lenders are more pessimistic and say talks are moving too slowly for that.

Greek officials now point to a race against the clock to clinch a deal before payments totaling about €1.5 billion to the IMF come due next month, starting with a €300 million payment on 5 June.

“Now is the moment that negotiations are coming to a head. Now is the moment of truth, on 5 June,” Nikos Filis, spokesman for the ruling Syriza party’s lawmakers, told ANT1 television.

“If there is no deal by then that will address the current funding problem, they won’t get any money,” he said.

Talks between Greece and its lenders have foundered on Athens’ demand to roll back labour and pension reform as well as lower fiscal targets set under its bailout programme.

Among concessions Athens is mulling is a special tax on banking transactions to help raise revenue to meet fiscal targets, though discussion of the levy is at an early stage, two sources close to the talks said.

If the talks collapse, Tsipras’s government has made clear it will pay pensioners and public workers before servicing debt.

>>Read: Greece offers concession with sale of Piraeus port

Greek officials have warned several times in recent weeks that Athens could run out of cash, only to then scrape through obligations by resorting to draconian measures such as ordering state entities to hand over cash or in the case of an IMF payment last week, by emptying out an IMF reserves account.

Four days before the payment was made, Prime Minister Alexis Tsipras wrote to EU and IMF lenders warning that Athens could not make the €750 million payment – prompting accusations of a bluff that has deepened mistrust.

Still, analysts agree the country’s cash squeeze is increasingly acute and fresh aid will be needed sooner or later to avoid bankruptcy. Ratings agency Moody’s said there was a high likelihood that capital controls and a deposit freeze could be imposed as savers pull deposits from banks over fears of a national bankruptcy and a Greek euro zone exit.

The European Central Bank’s governing council is due to meet later on Wednesday and will decide whether to dole out more emergency liquidity assistance to Greek banks, who have been kept on a drip-feed of liquidity injections amid the crisis.

Political push

Despite the spectre of impending bankruptcy, Tsipras has sought to maintain a brave face in public and will lobby European leaders at the EU summit in Riga this week for a political agreement to break the impasse.

Briefing top parliamentary officials in his party on Tuesday, Tsipras said the government was aiming for a deal by June 3 that would release over €7 billion in pending aid from the bailout, said one lawmaker who attended the briefing.

The premier also expressed optimism that differences with lenders on value-added tax hikes, privatisations and budget targets could be bridged to strike a deal now. Greece is pushing to delay discussion of pension reform to later this year, the lawmaker said.

Such a delay would be unlikely to win the sympathy of the lenders, who want Athens to offer more concessions and focus on bridging differences at technical-level talks aimed at trying to make the numbers on work.

>>Read: Europe’s well of sympathy for Greece runs dry

A deal could still be struck in the coming weeks but will depend on the degree of political will as there are still big gaps in the talks on labour and pension issues, EU Economic Affairs Commissioner Pierre Moscovici said.

“The Greek government has shown it can be creative in reimbursing its lenders but we must go quickly (in striking a deal with Greece),” he told a French Senate committee gathering in Paris. “It’s a matter of days and weeks.”

In a reminder of the early acrimony in talks between the two sides, Greek finance minister Yanis Varoufakis told the German weekly Die Zeit that his German counterpart Wolfgang Schaeuble made mistakes in his analysis of Greece.

“It is frustrating that we are not able to speak with each other in a context where arguments count more than relative power,” said Varoufakis, who has been sidelined in recent weeks in negotiations with lenders.

Background

On 20 March, the European Commission offered Greece funds to deal with what it called a humanitarian crisis, after Prime Minister Alexis Tsipras vowed to clarify bailout reform pledges demanded by creditors.

Following crisis talks between Tsipras and European leaders, EU Commission chief Jean-Claude Juncker said he was making available €2 billion in unused EU structural funds to Greece.

>> Read: Greece promises to deliver full reform list after three-hour 'mini summit'

Greece secured a four-month extension of its financial rescue on 24 February, when its eurozone partners approved an economic reform plan that backed down on key measures and promised that spending to alleviate social distress would not derail its budget.

>> Read: Eurozone approves Greek reform plan with reservations

Germany's rejection of an initial Greek request for a six-month loan extension forced Athens into a string of politically sensitive concessions, postponing or backing away from campaign promises to reverse austerity, scrap the bailout and end cooperation with the Troika of EU, ECB and IMF inspectors, which are now called "the institutions".

>> Read: Greece, eurozone agree to four-month loan extension, avert crunch