You are here

EU and IMF in 'common position' on Greece

[BRUSSELS] Eurozone ministers sought Monday to break a deadlock with the IMF on Greece's bailout, with Germany saying they had now reached a "common position".

Greece's EU and IMF creditors have been locked for months in a standoff over debt relief for Greece and budget targets demanded from Athens.

Markets have been spooked by fears of a return of the "Grexit" crisis, with Athens at risk of default this summer if it cannot unlock the latest tranche of the huge 86-billion-euro (S$129.195 billion) bailout agreed in 2015.

Fears are that a long series of elections, starting with the Netherlands in March and France in April, could delay matters dangerously.

Market voices on:

Germany's powerful finance minister Wolfgang Schaeuble said he was confident the International Monetary fund would continue to participate in the bailout.

"I am working on the principle that the (creditor) institutions now have a common position and that we have come far enough for the technical mission to go back to Athens," Mr Schaeuble said as he met eurozone colleagues in Brussels.

Creditor officials left Athens in December after failing to sign off on the second review of Greece's bailout and freeing up new funds.

Jeroen Dijssebloem, who heads the Eurogroup of finance ministers from the 19-country currency area, said it was a "good step".

"We've had intense talks with the institutions and Greek government in order to clear the ground for the mission to return to Athens," Mr Dijsselbloem, who is also the Dutch finance minister, told reporters.

"In the Eurogroup we will discuss whether we have reached that point, because that is my goal."

European economic affairs commissioner Pierre Moscovici said he was "confident" about the meeting and added that he was "hopeful that teams can return to Athens very soon".

Greece said last week that it hoped for a "political agreement in principle" at the meeting of the Eurogroup of 19 eurozone finance ministers in Brussels.

German Chancellor Angela Merkel meets IMF chief Christine Lagarde and European Commission head Jean-Claude Juncker in Berlin on Wednesday, in hopes of making further progress.

The Europeans have been at loggerheads with the IMF over the Washington-based lender's demands for easier budget targets and for Athens' mountain of debt to be reduced.

The IMF insists that budget targets demanded of Greece by the Europeans are too ambitious.

But if the eurozone is going to stick with its plans, then the IMF has demanded what it sees as the necessary tax hikes and pension cuts to meet them before it will lend further to Athens.

Greece, led by leftist premier Alexis Tsipras, refuses the further tightening of the screws, calling it an unfair addition to what he has already delivered.

Meanwhile eurozone hardliners led by Mr Schaeuble refuse to back down on the IMF's call for debt relief, while insisting at the same time that the IMF stay on board with the bailout.

"It's a very tough negotiation," said a negotiator on condition of anonymity.

The stakes could hardly be higher as the last such crisis, which followed Mr Tsipras's election, nearly saw Athens expelled from the euro.

A possible default by Athens is still some months off but it needs enough money to repay seven billion euros in debt in July.

The elections in Europe are adding to the pressure, with Mr Dijssebloem himself at risk of losing his job if the polls are right about his party's position.

Anti-EU candidates are leading polls in those elections and officials worry that Greece's future could get ensnared in the campaigning.

"Absent political agreement on Monday, a deal ... is likely to drift until April or indeed May," said Mujtaba Rahman, an analyst at the Eurasia group risk consultancy.

The delay would worry already jittery markets. Greece's two-year borrowing rates have risen as high as 10 per cent in recent weeks while France has also come under some pressure as investors seek safety in German assets.