Brussels, 11/06/2015 (Agence Europe) - The time had come in Brussels to rally the troops, but IMF technical staff returned to Washington after noting that there were still wide differences between Greece and its lenders over what they called the “unsustainable” pensions system.
IMF spokesperson Gerry Rice is quoted by Bloomberg as saying on Thursday 11 June that there had not been any progress recently to reduce these differences.
The Greek prime minister continued his round of high-level talks on Wednesday evening and Thursday afternoon, meeting the president of the European Commission, Jean-Claude Juncker, for two hours on Thursday. The talks reportedly focused on the process. After the talks, described by Juncker as friendly and important, Tsipras said that differences remained. Reuters quotes a diplomat who said it was a last attempt at making agreement possible. On Wednesday, Tsipras' meeting with the French and German leaders, Angela Merkel and François Hollande, on the fringes of the EU-Latin American summit, ended with a restatement of their desire to work harder.
At the moment, the parties still need to reach agreement on a list of reforms to be carried out. The eurozone wants Greece to make a political gesture. The question of pensions is key, as are the budget targets. The Greek appeals court has joined the debate. Greek media report that it ruled the 2012 cuts in pensions as unlawful. This ruling will not be retroactive, but the Greek authorities are reported to be required to keep pensions at the level of 2012, at an estimated cost to the treasury of between €1 billion and €1.5 billion. European Commission spokesperson Margaritis Schinas said the ruling would be formally published in a few weeks' time and the Commission would examine it at that time. It remains a sword of Damocles even if the parties are not concerned about it for the moment. A eurozone source admitted that the Greek court's decision was a problem.
Once agreement has been reached, Greece will have to be left time to introduce legislation because only implementation of the measures will release the bailout funding. The Financial Times says that after agreement is hopefully reached by Eurogroup on 18 June (some eurozone nation parliaments will have to rule on the agreement before the bailout plan expires on 30 June), then Greece will have to be given about a month to organise implementation of the agreement. It is hoped that the aid can be paid out by 20 July, when Greece is due to repay €3.5 billion to the IMF.
An extension of the bailout programme seems unavoidable. Greece has suggested a nine-month extension, in line with the timeline of its aid from the IMF, but the above-mentioned eurozone source says the extension will probably be shorter. Greece says the extension deal must include the purchase by the European Stability Mechanism (ESM) of Greek bonds held by the ECB (€6.7 billion reach maturity in the summer out of the total of €27 billion), along with the reallocation for other purposes of the funding earmarked for Greek banks by the European Financial Stability Fund (EFSF), and also concessions on the country's debt. The EFSF has €10.7 bn earmarked for Greek banks, but only a portion of this would be used for other purposes. The above eurozone source said that if the ESM were to buy the ECB's Greek bonds, this would amount to a new aid programme, as would concessions on the debt.
Time is running out and the risk of default is growing day by day, warned the president of the Bundesbank, Jens Weidmann, adding that Greece would not be able to repay the €1.6 billion due to the IMF on 30 June. In the light of the Greek government's decision to bundle all its payment to the IMF due this month into a single payment on 30 June, the S&P credit rating agency decided to downgrade Greece's sovereign debt to 'CCC' with negative prospects. (Elodie Lamer and Mathieu Bion)