Brussels, 15/05/2015 (Agence Europe) - On Thursday 14 May, Greece and its institutional lenders committed to a new round of talks with the 'institutions' (European Commission, ECB and IMF) on reforms to be introduced in Greece ahead of the payment of around €300 million in aid from the IMF, due on 5 June.
The teleconference technical discussions aired the differences between the parties on the scale of budget adjustment to be carried out, which will determine the scale of the measures to be taken by Greece, explained Greek newspaper Kathimerini. Greece will have to raise at least €3 billion to achieve its targets.
Talks are due to resume in Brussels on Monday 18 May and the institutions are expecting an updated reform list from the Greek government by Sunday 17 May. As a pledge of good will, the Greek economy minster, George Stathakis, explained on behalf of the government that the privatisation process currently under way for the port of Piraeus, along with 14 regional airports, would continue. Chinese company Cosco is one of the potential investors, explained defence minister Panos Kammenos on Friday 15 May. Another area of controversy is the VAT rate levied on the Greek islands, but Greek finance minister Yanis Varoufakis told the Greek parliament that it would not be raised before the summer.
The IMF management committee meeting on Thursday was attended by the ECB president, Mario Draghi, and discussed the situation in Greece. The meeting was said to have been requested by the IMF director general, Christine Lagarde, but the IMF said it was a routine meeting. Lagarde later held a meeting with Draghi. On Thursday, IMF spokesperson Gerry Rice said: “The last time we were here, you know, I don't accept the descriptor as I said then, we are flexible, we are open to looking at all the options, but we must insist on reaching the objectives of the programme. So we are open to different ideas, different options, different ways we can get there. We are fully flexible on that, but we, you know, need to see -- it needs to add up to reaching the objectives that have been agreed.”
After dipping into its reserve to pay the IMF the €650 million loan instalment due to it, the Greek government warned about its liquidity problems. Varoufakis said the country could hold out for another fortnight. On Thursday, Greek media reported that government spokesperson Gabriel Sakellaridis had said that agreement had to take account of the issue of liquidity and “Greek society makes the payments due from its own flesh.”
Publishing its economic forecasts on Thursday, the European Bank for Reconstruction and Development (EBRD) warned that Greece could enter a major recession if no agreement were reached with its lenders. The Greek economy shrank by 0.2% of GDP in the first quarter of 2015 on the last quarter of 2014, and the European Commission has divided by five its economic forecasts for 2015 (expecting GDP to rise by 0.5% compared with 2.5% in the previous forecasts). More money is reported to have been withdrawn from Greek bank accounts in April, to the tune of €7 billion, according to Bloomberg. The ECB is monitoring the situation on a daily basis. At the moment, the country's banks are financing themselves suing the ECB's emergency liquidity assistance (ELA).
Bundesbank governor Jens Weidmann criticised the situation in an article in Handelsblatt on Friday 15 May: “Given the ban on monetary financing of states, I don't think it's ok that banks which don't have access to the markets are being granted loans which then finance the bonds of their government, which doesn't have access to the markets itself.”
Greece wants the upper limit on the treasury bonds or gilts that Greek banks are allowed to buy to be relaxed and wants Eurogroup to send out a positive signal to make this possible at the ECB. Eurogroup pointed out on Monday that the ECB was an independent body (see EUROPE 11313).
Greece will have larger loan instalments to make in the summer, with more than €6 billion due to the ECB. At a conference organised by The Economist on Thursday, the Greek finance minister spoke of the idea that the ECB's SMP-programme Greek government (pre-2012) bonds (face value approx. €27 billion) be repaid through the ESM, with a possible parallel swap between new Greek government bonds and the ESM.
This would be a way of postponing the repayment of the debt, explained Varoufakis, and it would also mean that the ECB could benefit from the ECB's quantitative easing programme. Varoufakis said that Mario Draghi was scared of the idea. Varoufakis was furious about the way the idea had been relayed in some media, tweeting: “I spoke of a possible ESM-mediated repayment of ECB's SMP GGBs but some journalists report that I announced....non-payment! Astonishing propaganda!” The Greek government issued a press release clarifying the minister's ideas statements. (Elodie Lamer)