More Greek talks, Riga summit unlikely to be decisive

May 20, 2015

German Chancellor Merkel and Greek Prime Minister Tsipras leave after addressing news conference in Berlin

Greece’s European lenders have played down hopes of a swift end to aid negotiations and said talks must speed up before the country runs out of cash. That contrasted sharply with optimism in Athens where a series of top officials asserted that a deal was just days away.

The growing view is that a deal must be in place if the next IMF repayment is to be met on June 5. Athens owes around 1.5 billion euros to the IMF in various instalments through June which look very tough to meet.

“The Brussels Group” comprising officials from the European Commission, European Central Bank and IMF will meet for face-to-face talks with their Greek interlocutors today.

The leaders of Germany and France said on Tuesday that talks must be accelerated to free up further loans and that they would meet the Greek prime minister at an EU summit in Riga this week.

Greek premier Alexis Tsipras’s ears might have pricked up at that. He hopes to strike what he calls a political deal at the summit which is a forum to meet the bloc’s “Eastern partners” like Ukraine, Georgia and Belarus. But Angela Merkel, after talks with Francois Hollande, added that it was down to the Brussels Group talks to make progress.

EU leaders have consistently said a deal has to come via Greece’s creditors and the Eurogroup of euro zone finance ministers. They are not interested in a broad, top-down deal with the details sorted out later.

The European Central Bank’s Governing Council meets in Frankfurt. It may well eke out a little extra emergency funding for Greek banks to keep them afloat but will give no sign of acceding to Athens’ wish to be allowed to sell more short-term debt which its banks could then buy.

The ECB doesn’t want to push Greece over the edge while negotiations are continuing at a political level, but it wants to keep the country on a very short leash. Even so, there is disquiet. Bundesbank chief Jens Weidmann said last week that emergency liquidity for Greek banks broke the taboo of financing governments.

Turkey’s central bank has seen inflation rise of late, and is likely to leave interest rates on hold today despite political pressure for aggressive rate cuts before June elections. The bank has had to endure a barrage of demands from President Tayyip Erdogan to lower interest rates. He says high rates cause inflation – a view which, to put it mildly, flies in the face of mainstream economics. He has also equated high rates with treason.

Minutes of the Bank of England’s last policy meeting would deliver a big shock if they don’t show a unanimous verdict to keep interest rates at 0.5 percent. With inflation having turned negative in April for the first time since 1960, expectations of a first hike are being pushed back into 2016 despite the likelihood that inflation will pick up later in the year.

Britain’s top bosses should defend membership of the European Union by telling voters it is the best guarantee of prosperity, the head of the country’s largest business lobby group will say this evening. Mike Rake, chairman of BT and deputy chairman of Barclays will tell chief executives and politicians to turn up the volume on the benefits of the EU at the annual dinner of the Confederation of British Industry, of which he is president.

Deutsche Bank said on Tuesday it was reviewing whether to move some of its operations from London to Germany as a result of the uncertainty over Britain’s membership of the EU. HSBC has already cited that as one reason why it might choose to headquarter in Hong Kong.

Norway’s mainland GDP is forecast to have grown 0.2 percent in the first quarter. The central bank kept interest rates unchanged in a close decision last time and said it could cut to a record low 1.0 percent in June after low oil prices dragged its energy sector into recession.

The U.N. nuclear watchdog is expected to issue its monthly update on whether Iran is complying with an interim accord with big powers on curbing its atomic programme. Tehran’s negotiations with the six big powers continue ahead of an end-June deadline for a final deal that could ease sanctions.

Iraqi security forces deployed tanks and artillery around Ramadi to confront Islamic State fighters who have captured the city in a major defeat for the Baghdad government. After Ramadi fell on Sunday, Shi’ite militia allied to the Iraqi army advanced to a nearby base for a counterattack on the city, which lies in the Sunni province of Anbar, just 70 miles from Baghdad.

Warplanes from a Saudi-led coalition carried out the most sustained bombardment of Yemen’s capital Sanaa in nearly two months of air strikes. Yemen’s exiled government in Riyadh said it would not agree to talks with Houthi rebels until they withdrew from cities and surrendered weapons. Peace talks to end the civil war seem unlikely soon.

Burundi President Pierre Nkurunziza is due to address the nation. A power struggle over his bid for a third term in office could pitch Africa’s Great Lakes towards another bout of ethnic bloodletting.

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