Greece's government intends to reach an agreement with its lenders on a cash-for-reforms deal by Sunday, its spokesman said on Thursday, predicting that political intervention will be needed to finally close a deal with creditors.
Euclid Tsakalotos told the Guardian that the two sides are converging, but also criticized the International Monetary Fund for being “very very tough”.
But creditors have questioned this optimism warning that an agreement remains elusive. On Wednesday, European Commission's Vice-President Valdis Dombrovskis said progress was slow. “Of course there are a number of important areas to be discussed, in terms of fiscal targets, primary surplus targets, fiscal measures ... issues related to pension reform ... the labor market,” he said.
IMF Director Lagarde disagreed Greek statements; “it’s very unlikely that we will reach a comprehensive solution in the next few days,” Lagarde said. After there had been from Athens ten days before positive signals, “we were sobered again in the past week.” It should be “a vast field to plow.”
A top EU official said on Thursday that talks had to continue day and night, with a June 5 deadline approaching for Greece to pay back 300 million euros to the IMF.
“Talks ... have progressed more in the last three weeks than in the last three months,”European Economic Commissioner Pierre Moscovici told reporters in Dresden. “But we are not there yet and we have little time to find the necessary agreement.”
The European Central Bank piled more pressure on, saying that the financial markets could be rocked if the Greek crisis ends badly.
Greece has loomed over a meeting of Group of Seven finance chiefs in Dresden, Germany. Germany's Wolfgang Schäuble, who was hosting the G7 meeting, said on ARD television that “on the substance, we haven't got much further in the negotiations between the three institutions and the Greek government.”
“I am always surprised when we are told by Athens that an agreement is imminent,” Schäuble told ARD.
“At some point, the discussion has to be transformed into something on paper,” French Finance Minister Michel Sapin said in an interview en route to Dresden. “We need a draft.”
In Athens, the conservative opposition criticized the government's handling of the negotiation. “It is obvious that the government is at a dead-end,” said New Democracy party spokesman Kostas Karagounis. “It announces deals that don't exist, it presents its own positions as agreements, it is refuted by all foreign officials and meanwhile time has run out and the money has been exhausted.”
Teams from Greece and its international creditors resumed talks in Brussels on Wednesday. Seeking to bridge the gap between the two sides during the technical talks, Greece presented an updated VAT proposal with the aim of increasing revenues this year by 850 million euros, even though lenders are looking for a boost of 1.8 billion euros.
According to major Greek daily Kathimerini the Greek government proposed a low rate of 6 to 6.5 percent for medicines, a medium rate of 10 to 11 percent for food, electricity and possibly tourism, and a top rate of 21 to 22 percent for all other goods and services. However, lenders are thought to favor just two rates and most items to be taxed at the top rate.
The round of negotiations will continue in Brussels today, and over the weekend, to close the gap on labour market reform, pensions, VAT rates and Greece’s budget targets.
(Guardian, Kathimerini, WSJ, Reuters, AP)