The “take it or leave” it moment?

June 2, 2015

German Chancellor Merkel, French President Hollande and European Commission President Juncker arrive to make statements to the media before a meeting with top company executives in Berlin

Five people who hold Greece’s fate in their hands – Angela Merkel, Francois Hollande, Mario Draghi, Jean-Claude Juncker and Christine Lagarde – met for talks in Berlin last night.

Did they decide to make some concessions to help Greek premier Alexis Tsipras cut a deal or was this the moment where a “take it or leave it” offer was formulated as some EU officials have been urging?

Little has been revealed so far bar a commitment to work with “real intensity” to reach a deal and keep in close contact. It feels like a big moment nonetheless, with officials saying the goal was to reach a mutually agreed position.

The received wisdom is that the IMF has been most reluctant to give any ground. Juncker and the European Commission have appeared to be more sympathetic with the ECB somewhere in between.

Greece’s lenders may bend a little but it seems pretty clear that Tsipras is going to have to concede much more. Up to now he has insisted that any cash-for-reforms deal should include low primary budget surpluses, no cuts in wages and pensions, a debt restructuring and an investment programme.

The EU and IMF have been equally steadfast in their view that Athens had to move substantially so they can at least pretend that Greece’s gargantuan debt is on a downward path to allow them to hand out more bailout money.

Greek Labour Minister Panos Skourletis is out saying Athens cannot make more concessions but German newspaper Die Welt reported that Tsipras was now ready to discuss pension reforms.

One presumes that the five leaders may have delivered a more substantive statement to Athens in private than what was offered up for public consumption.

The euro zone wants to conclude slow-moving negotiations over a cash-for-reforms deal quickly to allow time for institutions and ministers to approve a deal and secure parliamentary backing to disburse frozen aid before Greece’s bailout expires at the end of June.

One EU official said any offer from Greece’s creditors to Athens would not be framed as an ultimatum but neither was there any talk of concessions from the euro zone and IMF.

Athens is due to make a 300-million-euro repayment to the IMF on Friday amid growing doubts about its ability to meet all this month’s repayments to the Fund which total 1.6 billion euros.

One euro zone official said it was less likely that Athens would be able to pay a second installment of 340 million euros on June 12 without a new injection of cash or a delay. It then owes 556 million euros on June 16 and another 340 million on June 19.

Tsipras, who talked by phone to Merkel and Hollande on Sunday, has urged them to reach a broad political deal to break the logjam. They have hitherto insisted that Greece must wrap up talks at the technical level with adequate concessions on reforms so that its budget and debt numbers add up.

The Greek premier met his negotiating team for a long session on Monday night.

After inflation in Germany jumped to an above-forecast 0.7 percent in May, all eyes will be on the euro zone figure today. It is predicted to rise to 0.2 percent, out of deflationary territory but still way short of the ECB’s target of close to but below two percent. The German figure puts an upside risk on that estimate though.

Scottish nationalist leader Nicola Sturgeon will use a speech in Brussels to say a vote for Britain to leave the EU would unleash a ‘groundswell of anger’ in Scotland that could stoke fresh clamour to break away from England.

A panel comprising senior members of South Africa’s Reserve Bank will discuss recent domestic and international developments that have impacted on inflation, and that guide the rationale behind the Bank’s monetary policy stance.

Ministers from Western and Middle Eastern countries fighting Islamic State will tell Iraq to be more inclusive of its Sunni minority as they reassess their strategy against the jihadists after major setbacks. The meeting in Paris, which about 20 ministers from countries including Saudi Arabia and Turkey will attend, will focus on helping Baghdad reverse its biggest military defeat in nearly a year – the fall of Ramadi, capital of Anbar province, just 90 km (55 miles) west of Baghdad.

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