FT, June 15 2015 Both sides in Greek bailout crisis harden positions Kerin Hope in Athens, Peter Spiegel in Brussels and John Aglionby in London
Both sides in the deadlocked Greek bailout crisis hardened their positions on Monday, a day after the collapse of the latest talks to broker an agreement between the cash-strapped government in Athens and its international creditors. With two weeks to strike a deal before Greece’s next loan repayment is due, Alexis Tsipras, the Greek prime minister, accused creditors of “political motives“ behind the latest rejection of his proposals and claimed to be “shouldering . . . the hopes of the people of Europe”. Greek markets fell sharply in response to Sunday’s failure in negotiations, with both sovereign debt prices and the country’s stock market weakening. Bond yields, which move inversely to prices, in Italy, Portugal and Spain also rose as investor jitters spread. Greece has been asked by creditors to raise the retirement age and reduce pension outlays by 1 percentage point of national output over the next 18 months as a first move towards making the state pension system sustainable but would not be required to cut main pensions, according to people following the bailout talks. Mr Tsipras says further pension cuts are a “red line” that cannot be crossed after successive bailout reductions that have reduced the average pension by more than 40 per cent. “The Greek government has been negotiating with a specific plan and documented proposals. We will wait patiently until the institutions adhere to realism,” the premier added. The impasse is the clearest sign yet that differences between the two sides may be too wide to bridge, increasing the possibility that Athens will not secure the €7.2bn in bailout aid it needs to avoid defaulting on its debts — including a €1.5bn loan repayment due to the International Monetary Fund in just two weeks. In a rhetorical flourish, Mr Tsipras also said: “We are not simply shouldering a history laden with struggles. We are shouldering the dignity of our people, as well as the hopes of the people of Europe. We cannot ignore this responsibility. This is not a matter of ideological stubbornness. This is about democracy.” On Sunday talks to discuss a new economic reform proposal submitted by Athens, lasted about 45 minutes after the plan was deemed inadequate by Greece’s bailout monitors — the European Commission, the IMF and the European Central Bank. The Commission on Monday took the unusual step of outlining the entire proposal Jean-Claude Juncker, the commission president, had made to Mr Tsipras in a meeting two weeks ago. Although most of the substance was already known, Brussels’ decision to go public with its offer — as well as to present some of the details of Greece’s counter-offer — was a sign of how contentious the negotiations have become. On the biggest sticking point between the two camps — overhauling public pensions — Annika Breidthardt, the commission’s economics spokesman, called Greece “one of the most expensive pension systems in Europe” and said the cuts proposed by Athens would amount to less than 0.04 per cent of gross domestic product. Creditors have sought a cut of 1 per cent of GDP per year, or about €1.8bn annually. She also said the new budget surplus targets presented by creditors were one of “a number of concessions” made by the creditors and signalled there was little willingness to concede any further. “The fiscal targets for 2015 have already been substantially revised downwards,” Ms Breidthardt said. “The reduction is actually bigger than what can be attributed to the economic cycle alone.” According to a copy of the Greek counterproposal sent to creditors at the weekend and obtained by the FT, Athens has now agreed to meet the creditors’ demands on budget surplus targets for this year and next year. For 2015, Athens said it would reach a primary budget surplus of 1 per cent and 2 per cent in 2016 — something the Greek government has resisted for nearly two weeks. But officials representing Greek creditors said many of the underlying fiscal measures — such as €700m in savings for value added tax fraud — were unlikely to be met, making the promise to achieve surplus levels relatively meaningless. “The question is how credible the commitments are to achieve those targets,” said Ms Breidthardt. A Greek government spokesman reiterated that Sunday’s collapse in the bailout talks did not necessarily mean they were at an end. “We’re not saying they’ve hit a brick wall. The efforts will continue,” he said. “But to a large extent we’ve reached the limit (in making concessions).” Hardliners in Mr Tsipras’s ruling Syriza party demanded a definitive break with creditors, calling on supporters to stage street protests against further austerity measures. Yields on Greece’s two-year debt climbed 192 basis points to 26.97 per cent on Monday morning. On 10-year bonds, yields are up 40bp to 11.77 per cent. The Athens General Stock Exchange index was down 7 per cent at 720.32 points on Monday. Bank stocks led the losers with Piraeus Bank falling 14.6 per cent on Monday. Alpha Bank was down 12.5 per cent and Eurobank Ergasias 11 per cent weaker. National Bank of Greece, one of the biggest private sector holders of Greek sovereign debt, was 10.2 per cent softer. The index is 42.3 per cent lower than it was a year ago. Greece has nothing to lose by saying no to creditors TOPSHOTS Protesters take down a huge banner bearing a picture of Greek Prime Minister Alexis Tsipras on a European Union flag from the ministry of finance in Athens as they end the occupation of the building on June 11, 2015. The Greek government on Thursday said it would "intensify" efforts to resolve differences with its EU-IMF creditors to reach a deal that would give the country desperately needed bailout funds. The sell-off spread to other eurozone peripheral sovereign bonds. Italian, Spanish and Portuguese 10-year yields are up 6.4 basis points to 2.30 per cent, 7.9 basis points to 2.31 per cent and 11 basis points to 3.16 per cent respectively, while equivalent maturity Treasuries and Bunds are down 3 basis points to 2.36 per cent and 3 basis points to 0.82 per cent. Thursday’s eurogroup meeting of eurozone finance ministers is seen by many officials and analysts as the last chance for Athens to secure agreement on a list of economic reforms its creditors are demanding in order to release the €7.2bn before Greece’s EU bailout runs out at the end of the month. François Hollande, the French president, said on Monday that “turbulent” times were looming “if we don’t reach an agreement”. “Let us not waste time and let’s restart the negotiations as soon as possible,” he said on the sidelines of the Paris air show. Without the endorsement of the bailout monitors the chances of an amicable agreement on Thursday are remote, raising the prospect eurozone negotiators may resort to the “take it or leave it” strategy used on Cyprus at a eurogroup meeting two years ago. Reporting by Michael Hunter and Naomi Rovnick in London _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
