May 01, 2015


Greece and creditors reach agreement - on a news blackout

It's the May 1 bank holiday, no newspapers in most of continental Europe, and thus a slightly shorter briefing than usual.

Negotiations between Greece and the Brussels group continued though with what it seems some earnest attempts to reach a deal by Sunday. The Greek government signalled some concessions before the meeting marathon started yesterday, though continued to insist that the red lines are not to be crossed.  

Reuters quoted a top government official saying that Athens was willing to compromise on value-added tax rates and some pension reforms and sell a majority stake in its two biggest ports. The press reports that Athens could consider a flat VAT rate on all goods and services except drugs, foods and books and could adjust supplementary pension payouts, though it insists on not cutting those below €300 a month. As for so-called "13th month" payment to pensioners - the target of some euro zone finance ministers whose countries have less generous systems - the Greek government seems to be prepared to suspend or "phase in" the reintroduction of the scheme, according to Macropolis. On increasing the minimum wage - a campaign promise by Tsipras that is strongly opposed by lenders - the official said Athens would consult with the OECD and the International Labour Organisation before taking any action.

Macropolis writes that the compromise proposals remain vague and allow room for interpretations. The article notes that there is no reference to the abolition of early retirement schemes any more and there is still a court ruling expected in May over the constitutionality of earlier pension cuts. There are also contradictory statements with respect to privatisation, with statements insisting that the government will not sell off at knockdown prices shortly after a government official had told Reuters that Athens is willing to sell majority stakes in Piraeus and Thessaloniki ports. However, it should be noted that the official refers to selling a 51% stake, which is below the 67% share of the Piraeus Port Authority (OLP) that Greece was due to sell.

The Greek side wants the progress to be recorded at an extraordinary eurogroup meeting on Monday May 4. Both sides agreed on a news blackout and Alexis Tsipras stands ready to step in if needed. The discussions also include the omnibus reform bill, which was not discussed in the cabinet meeting yesterday. Greek Reporter quoted one government official saying that there is no reason for such a meeting as long as the talks in Brussels continue.  The IMF says to move forward there has to be a comprehensive package rather than a list of single reforms.  

The next payment to the IMF is due May 6, €200m in interest payments before the €750m tranche on May 12. 

Benoît Coeuré suggested that the ECB could lift the cap on T-bill issuance if there were "an agreement in sight" with the creditors to the Euro Working Group on Wednesday, the Wall Street Journal reports.  A decision from the ECB to allow Greece to issue more than the current €15bn in treasury bills could ward off a liquidity crunch for the Greek government. Greece’s representative told other participants in that meeting that the government’s “liquidity situation is dramatic,” the paper quotes one of the people familiar with the discussions.

Our other stories

Today we also have stories on why no one should be talking about a recovery in inflation yet; Spain’s growth figures; commentary on Spain and the euro; Renzi’s control over his party; coalition dealing in Finland; and news from the Irish Central Bank.

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