Greek Groundhog Day: Talks Fail to Break Impasse

By Jonathan Stearns

Another round of top-level talks failed to resolve the standoff between Greece and its international creditors as Prime Minister Alexis Tsipras rejected proposals that would unlock bailout funds necessary to avert a default.

After a meeting with European Commission President Jean-Claude Juncker and Dutch Finance Minister Jeroen Dijsselbloem, who also heads the group of his euro-area counterparts, Tsipras said the basis for any accord must be a Greek proposal meant to avoid spending cuts and tax increases, rather than a plan drafted in recent days by creditors.

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“The realistic proposals on the table are the proposals of the Greek government,” Tsipras told reporters early Thursday in the Belgian capital. We can’t “make the same mistakes, the mistakes of the past,” he said.
The commission said in a statement that “intense work” will continue and “progress was made in understanding each other’s positions on the basis of various proposals.”
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Months of antagonism and missed deadlines have given way to a greater urgency to decide the fate of Greece. Without access to capital markets, the country has to meet four payments totaling more than 1.5 billion euros ($1.7 billion) to the International Monetary Fund in June, while its euro-area-backed bailout also expires this month.

Tsipras signaled that Greece will meet its first June IMF payment, which is due Friday. “Don’t worry,” he said in response to a reporter’s question about the matter.

The single currency was little changed at $1.1261 as of 10:48 a.m. in Tokyo. It rose as much as 1.2 percent to $1.1285 on Wednesday, the highest since May 19.

‘Constructive Will’Tsipras said demands by the euro area and the IMF for cuts in the income of poor pensioners and increases in value-added tax on power are unacceptable, highlighting what have been “red lines” in Greece’s stance since his anti-austerity Syriza party swept to power in snap elections in January.
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“Ideas like cutting benefits for low-income pensioners, or raising the VAT rate for electricity by 10 percentage points, can’t be a basis for discussion,” he said.
The premier sought to paint the commission, the European Union’s executive arm, as more favorable to his proposals than are other creditor representatives deemed by Greece to be taking a harder line in the aid deliberations.

“There was a constructive will from the European Commission to reach a common understanding,” he said.

The Tsipras government has looked to the commission for support to dilute the austerity-first formula that’s underpinned two Greek rescues totaling 240 billion euros since 2010. This has led to clashes with creditors who say such bailout conditions have worked for other countries such as Ireland now out of aid programs and Greece should get no special treatment.
Market RallyThe euro area now wants an agreement to be wrapped up by June 14, according to a Greek official. The new deadline emerged in the talks between Tsipras, Juncker and Dijsselbloem, the official said, asking not to be named because the meeting was private.

Greece’s creditors want the targets for the primary budget surplus -- the budget balance excluding interest payments -- to be 1 percent of gross domestic product this year, 2 percent of GDP in 2016, 3 percent in 2017 and 3.5 percent in 2018, said the Greek official, who called these proposals a “good basis” for further deliberations on the matter.

Tsipras said both sides were “very close” to an agreement on the targets for the primary surplus.

Greek stocks and bonds rallied Wednesday on expectations that the talks in Brussels would yield a breakthrough, with the Athens Stock Exchange index gaining 4.1 percent. Yields on two-year notes fell 118 basis points to 22.8 percent.

European Central Bank President Mario Draghi on Wednesday called for a “strong agreement” to end the deadlock, which has pushed the country into a double-dip recession, amid renewed doubts over its place in the 19-nation euro area.