No Greek deal in Riga but glimmers of convergence

April 24, 2015

Greek Finance Minister Varoufakis attends a parliamentary session in Athens

We’ve been saying it for a week or more and it’s now confirmed – the lack of an economic reform programme forthcoming from Athens means today’s meeting of euro zone finance ministers in Riga can achieve no breakthrough despite glimmers of the two sides moving closer.

There is a little time left yet. Euro zone and Greek officials said the government could scrape together enough cash to meet its obligations into June, playing down fears of an imminent default.

Already officials are looking to the next Eurogroup meeting in Brussels on May 11. Greece is due to pay 750 million euros back to the IMF one day after that.

After talks with German Chancellor Angela Merkel on Thursday, Greek Prime Minister Alexis Tsipras called for a speeding up of the process to conclude a reform-for-cash deal with euro zone creditors by the end-April deadline set when both sides agreed to extend Athens’ bailout in February.

Merkel said “everything must be undertaken to prevent” Greece running out of cash.

One problem is that the Greek government thinks a broad political deal can be struck with other leaders, leaving officials to fill in the details. The euro zone, led by Germany, insists the technicians must sort out a comprehensive deal and only then will governments sign off on it.

Greek Finance Minister Yanis Varoufakis wrote in a blog that new concessions had been offered by Athens on some of the reforms demanded by its lenders, including proceeding with some privatizations and setting up an independent tax commission.

But he rejected any more wage or pension cuts and said he wanted leeway on the government’s primary budget surplus targets, declaring that the euro zone must drop “an approach that has failed”.

French Finance Miniister Michel Sapin said there was scope to discuss the size of Greece’s primary surplus, which could give it a bit of leeway to spend more, but all this comes far too later for an accord in Riga.

On arrival, German Finance Minister Wolfgang Schaeuble said he did not expect decisive progress today, European economics commissioner Pierre Moscovici said there was some progress but it was too slow and EU Vice President Valdis Dombrovkis called on Athens to accelerate its work on the reform list that has yet to materialize.

Shut out of bond markets and running out of money to pay civil servants, pensioners and suppliers and service its debt, the government issued a decree on Monday ordering public bodies to transfer their spare cash to the central bank.
That will buy time but is clearly not a sustainable strategy. Parliament is expected to vote on that decree today. Protests are likely outside.

To receive some 7.2 billion euros of remaining bailout cash, Athens must agree a reforms programme with the European Union, the International Monetary Fund and the ECB. That bailout expires at the end of June after which a whole new agreement will have to be thrashed out which one presumes will prove even more difficult than extending the existing one has proved.

In economic terms, the Greek government has a perfectly legitimate argument that piling on more austerity is not a clever way to try and reduce its debt mountain. But no one is claiming their negotiating tactics have been successful.

After an April PMI survey showed growth in Germany’s private sector slowed slightly, the big economic figure of the day is Germany’s Ifo business sentiment reading.

During a visit to Armenia, French President Francois Hollande is due to meet Russia’s leader Vladimir Putin with the West saying there is no question of relaxing sanctions until a Ukraine ceasefire agreement is fully adhered to.

There is a question over the future of a contract for French Mistral helicopter carriers sold to Russia, which Paris has suspended. Earlier this week, Hollande raised the possibility of completely cancelling the deal. French Prime Minister Manuel Valls is in Dublin for talks with Irish premier Enda Kenny.

The Russian Defence Ministry said on Thursday that U.S. troops were training Ukrainian forces in the conflict zone in eastern Ukraine, but the Pentagon flatly denied it, accusing Moscow of a “ridiculous attempt” to obscure its own activity in the region.

U.S. Secretary of State John Kerry told his Russian counterpart in a phone call that Russia must withdraw its forces from eastern Ukraine.

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