The Greek government has to deal with its international creditors as the lenders are losing patience with the country’s uncompromising stance on its debt obligations.
Even thought European Commission Vice President Valdis Dombrovskis appeared optimistic over the possibility of reaching a deal he also stated that Athens must show political will to overcome the stalemate.
“The Greek government's proposals are more of wishful thinking than feasible solutions” a senior EU official, who wished to remain anonymous, told iefimerida. Consequently time is running out without reaching closer to an evaluation of these proposals and to a subsequent deal.
The same sources also claim that Greece cannot secure extra funding, besides the pending installments. Capital of the Hellenic Financial Stability Fund could also be released but under conditions. This means that a possible 9-month extension of the bailout program is practically impossible as it requires new funds which do not exist.
The prevailing scenario is that the bailout program could be extended till the end of the summer, so that Greece could remain under the umbrella of the European Social Fund (ESF) and that a new loan agreement can be signed - under conditions – in September in order to ensure sufficient funding to cover the borrowing needs of the next few months or even years. However this scenario requires, that Greece will reach an agreement with its lenders to complete the evalutaion of the current program, which passes through three stages:
[1] Reaching a primary surplus of 1 per cent for the full year 2015.
[2] Agree on the financial "gap" and the way it will be covered. Sources close to the negotiations confirm that the middle VAT rate will be set at to 13%, and that probably eating establishments will move from a 13% to 23% rate. Nevertheless the Greek government is sticking to its non-negotiable "red lines" on labor and pension issues.
[3] Even if Greece and its international creditors agree on the budgetary issues they should also agree an the fiscal gap. Based on current data, Greece's borrowing needs can be met till September by resorting to the last funds of the current program and imposing effectively the new fiscal measures (eg VAT increases) to raise revenue till the end of the year.
The International Monetary Fund (IMF) will remain till it receive its payment giving a hard time to Greece and the EU institutions as it pressures for the restructuring of the Greek dept.
So the question remains if it would be possible for the European Stability Mechanism (ESM) to buy Greece's debt to the IMF? “Only under a new loan agreement and new conditions,” clarifies the same EU official, adding another parameter to the extremely complicated equation.