Tsipras talks up May deal with creditors

April 28, 2015

Greece's PM Tsipras, Malta's PM Muscat, EU Commission President Juncker and France's President Hollande attend an EU leaders summit in Brussels

In his first major television interview since being elected in January, Greek premier Alexis Tsipras said last night he expected a deal with creditors by May 9 and that he would call a referendum if they insist on demands that the government deems unacceptable, leaving it to the Greek people to decide which way to jump.

The next meeting of euro zone finance ministers is on May 11, a day before Athens must pay 750 million euros back to the International Monetary Fund, a bill it is not certain it can meet.
Tsipras made what could be a significant move on Monday,  reshuffling his team handling talks with European and IMF lenders and sidelining Finance Minister Yanis Varoufakis  after a car crash meeting with euro zone finance ministers in Riga last week.

Deputy Foreign Minister Euclid Tsakalotos – an economist well-liked by officials representing the EU and IMF – was appointed coordinator of the group, giving him a more active role in the negotiations.

That move prompted Greek bond yields to dive though an agreement is far off yet. Some euro zone officials said it was a positive step.

Concessions have 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 in key areas the gap is still gaping wide.

Tsipras said negotiations were in the final stretch despite differences on labour reform, pension cuts and a proposed value-added tax hike on popular islands.

He said he expected an initial deal on reforms this week or next and that asset sales would be part of the concessions offered, including two major items – the sale of Piraeus port and the lease of 14 regional airports. Only if that plan is accepted by the euro zone and IMF will 7.2 billion euros remaining in Greece’s bailout pot be made available.

On the other side of the table, there may be some willingness within the euro zone to lower the target for Greece’s primary surplus, which would give it a bit of leeway to spend more. But there are a lot of “ifs” still and no clarity as to exactly when the government will run out of money.

First quarter British GDP data are due this morning which are loaded with significance nine days before elections which could go a long way to dictate whether the UK holds together and remains a part of the European Union.

Quarterly growth of 0.5 percent is forecast, the slowest pace in more than two years  but still pretty healthy. The problem for the ruling Conservatives is that a strong recovery since mid-2013 hasn’t really translated into higher living standards. People are not feeling the benefit.

With inflation having evaporated, real wages are now rising. The question is whether that is too late to resonate at the ballot box on May 7.

The Institute for Fiscal Studies, which has developed a reputation as being the arbiter of the parties’ economic policies, will publish its analysis of the tax and benefits plans of Labour, Conservatives, Liberal Democrats and SNP.

Different polls put Labour or the Conservatives ahead but none suggests either will have a parliamentary majority and the poll of polls – which aggregates all the surveys – puts the two main parties neck-and-neck. One poll on Monday put the Conservatives an unusually high six points ahead but another gave them a lead of just one percentage point over Labour.

What is clear is that the Conservatives’ strategy of focusing on economic recovery and talking of “competence versus chaos” has failed to achieve the lift-off they were hoping for.

Furthermore, by painting opposition Labour leader Ed Miliband as hapless the Conservatives set the bar so low for him that he has exceeded expectations. None of this is to say that David Cameron won’t be prime minister after the election but it is he who faces the bigger choice about whether to stick with the message or try and broaden it in the closing days.

The Conservatives can really only look to the Liberal Democrats, with whom they have shared power for the past five years, to form a coalition possibly bolstered by a small party in Northern Ireland.

Miliband has ruled out a pact with the Scottish Nationalists but can still probably count on their support to prevent the Conservatives keeping power. The polls suggest the SNP will get up to 50 parliamentary seats while the LibDems will struggle to keep 30. Ergo, Cameron probably has to win 20+ more seats than Miliband to remain prime minister.

Ireland, now rebounding from financial crisis, will give updated economic forecasts for 2015 in its Spring Economic Statement.

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