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10/12/2016

Tsipras says Greece in ‘final stretch’ for deal with creditors

Euro & Finance

Tsipras says Greece in ‘final stretch’ for deal with creditors

Alexis Tsipras on 13 July [The Council]

Greek Prime Minister Alexis Tsipras on Wednesday (5 August) said his government is nearing a deal with international creditors on a mammoth bailout, as his spokeswoman raised the prospect of early elections in the fall.

“We are in the final stretch to conclude an agreement with the institutions,” Tsipras said in televised remarks.

“Despite the difficulties, we hope this agreement can end uncertainty over the future of Greece and the eurozone,” he added.

Greece needs a deal that will unlock bailout funds by August 20, when it must repay some €3.4 billion due to the European Central Bank.

The Greek economy is also suffering from the effects of capital controls imposed at the end of June to avert a bank run, a procedure that has badly disrupted trade.

The Athens stock exchange, which opened with a record drop on Monday after a five-week shutdown, closed 2.53% down after losing over 4.2% earlier in the day.

>> Read: After five-week shut down, Greek shares plummet

Bank shares were once again the hardest hit, trading near the maximum allowed drop of 30% for three straight days.

European Commission head Jean-Claude Juncker said Wednesday that an agreement on the bailout was possible by August 20. “All the reports I am getting suggest an accord this month, preferably before the 20th,” Juncker told AFP in an interview.

In a statement on Wednesday evening, the Greek government also said a deal was “totally feasible” by August 20.

“We are very confident that we are edging very close to a final draft,” government spokeswoman Olga Gerovasili said. On Tuesday Finance Minister Euclid Tsakalotos had told journalists the high-stakes talks were going “at least as well as we expected”.

Autumn elections

On Wednesday evening, as he left the Hilton hotel where top representatives of Greece’s creditors are staying, Tsakalotos said “there are three or four issues still being discussed.”

Meanwhile Tsipras is under pressure from a sizeable minority in his radical-left Syriza party who say the rescue package he agreed to last month piles further austerity on a weakened economy and goes against the government’s campaign pledges.

On Wednesday the prime minister said Greeks had to “adapt to the new circumstances” but insisted that his administration would continue to negotiate with the country’s creditors to secure a “fair” distribution of tax pain.

In two successive reform votes last month, more than 30 lawmakers from Syriza refused to approve the measures included in the bailout, which is worth up to €86 billion over three years.

With his popularity among Greeks still high, Tsipras has warned the dissidents of early elections in the autumn if they continue to resist the measures.

“Elections are likely in the autumn,” Gerovasili told Vima radio earlier. “It mainly depends on how steady this government can be in the coming period.”

Tsipras’s main party opponent, eurosceptic ex-energy minister Panagiotis Lafazanis, on Wednesday repeated his refusal to accept the new cuts.

“When the new memorandum comes to parliament, I will not vote for it,” said Lafazanis, head of a Syriza faction called Left Platform.

“I imagine all the lawmakers associated with Left Platform will not vote (either),” Lafazanis said during a visit to the northern city of Thessaloniki.

Greece on Wednesday raised €812.5 million in six-month treasury bills.

Also on Wednesday, the European Central Bank decided to leave its emergency credit lifeline for Greek banks unchanged for the next two weeks, said a source close to the matter who asked not to be identified.The official said the Frankfurt-based bank’s executive board would maintain its Emergency Liquidity Assistance (ELA) for the country’s struggling lenders at €90.5 billion.

Greek banks were closed for three weeks under capital controls imposed by Tsipras’s government to prevent the collapse of the credit institutions.

The restrictions were eased on July 20, but withdrawals and money transfers abroad remain limited.

Finance Minister Tsakalotos said the much-needed recapitalisation of Greece’s banks should take place “by the end of the year”.

Background

When creditors agreed in July to negotiate a deal aimed at keeping it afloat and in the euro zone, Greece committed to implementing major reforms, such as scrapping early retirement, by the end of October. Lenders want, for example, an increase in the retirement age to 67 from the nominal 62 that falls significantly depending on the number of years worked and family status.

Technical teams also discussed tax, justice and corruption issues and about setting up a new Greek privatisation fund and about bad loans.