Greece and its creditors are starting to draft a technical-level agreement, a government official said Reuters on Wednesday, expressing optimism that his government will finally reach a compromise with it's creditors after months of talks to unlock much needed aid.
According to Reuters the official said the deal would avoid wage and pension cuts, include reform of VATs and include a lower target for a primary surplus in the first year.
The Greek official also cited differences between the EU and IMF as holding up an overall deal and called on the creditors to do their part to ensure a deal was struck. “There remains a problem with the differing stance among the institutions. If an agreement by the IMF was not needed, the deal would have closed by now” the official said.
The statement appeared to suggest significant progress in talks with Greece's creditors. But European officials have been more reserved in their outlook. “Negotiations between the three institutions and the Greek government still haven’t come very far,” German Finance Minister Wolfgang Schaeuble said late Wednesday in an interview with ARD television. He is “always a bit surprised” when Greece says an agreement is near Blomberg reports.
Delegates at a meeting of G7 finance chiefs in Dresden, Germany, diverged from the main program to push back against Greek claims that the country will start drafting an accord, and that an agreement is near with the European Central Bank, European Commission and IMF. The gathering in a former palace brings together Greece’s three creditor institutions as well as Dutch Finance Minister Jeroen Dijsselbloem, who chairs meetings of his euro zone colleagues.
The United States urged international creditors to show more flexibility in negotiations with Greece's leftist government to avert a possible default and exit from the euro zone with unpredictable consequences for the global economy.
Europe needs “to recognize that there are limits to the degree of austerity that can be imposed and that ultimately problems get solved through growth,” former U.S. Treasury Secretary Lawrence Summers said in a Bloomberg interview in Dresden.
Earlier on Wednesday, U.S. Treasury Secretary Jack Lew spoke to Tsipras on the phone for the second time in less than a week. A Treasury Department statement said Lew "reiterated that failure to agree on a path forward would create immediate hardship for Greece and broad uncertainties for Europe and the global economy."
Before setting off for Thursday's G7 summit in Dresden, Lew issued a warning on Wednesday “Brinkmanship is a dangerous thing, when it only takes one accident [...] a miscalculation could lead to a crisis that would be potentially very damaging,” Lew told students at the London School of Economics.
“It's a mistake to think that a failure has no consequences outside of Greece,” he said. “We don't know the exact scope.”