Greece has only days left to reach a cash-for-reforms deal with creditors because it needs to start negotiating a third bailout that would save it from bankruptcy after the current programme ends in June, eurozone officials said yesterday.
Cut off from markets, Athens is fast running out of cash to pay salaries, service loans and redeem maturing debt. This poses a growing risk that it may default and perhaps have to leave the eurozone.
But Greece has been unable to agree with creditors on what reforms it should implement to release more emergency funding because its new left-wing government won in January on promises of putting an end to austerity.
The €240bn bailout from eurozone governments and the International Monetary Fund, under which Athens could still get some money, expires at the end of June.
“The financing of the Greek government is not sustainable without a third programme: additional financing,” a senior eurozone official said ahead of a meeting of eurozone deputy finance ministers yesterday.
That would have to be agreed at the latest in May so eurozone governments had time to secure parliamentary approval.
Tourists stand in front of the parliament building as pigeons fly by in Athens. Photo: Reuters“We are not talking about weeks any more, we are talking about days,” the official said.
However, neither the Greek government nor eurozone finance ministers were ready to begin discussing such a new bailout plan for Athens yet, the official said.
Greece did not want to perpetuate the loss of sovereignty over policy making that bailouts entail and the eurozone wanted to see Athens implement reforms agreed under its existing bailout before starting to discuss any follow-up arrangement.
After three months of talks on reforms that eurozone officials said were “going nowhere”, Greek Prime Minister Alexis Tsipras weighed in on Monday, reshuffling his negotiating team and sidelining outspoken Finance Minister Yanis Varoufakis.
“My understanding of what the prime minister said on Monday was precisely that he understands now that he is running out of time. He has decided to step in personally and take control of the discussions,” the eurozone official said.
It could be pensions, it could be the labour market but they have to pay the political cost
Greece plans to present a list of reforms that would satisfy the eurozone at a meeting with representatives of the European Commission, the International Monetary Fund, the European Central Bank and the eurozone bailout fund today.
But in the creditors’ eyes, that will be only the start of a crucial discussion.
“It is probably only next week that we can begin to figure out if there is a tangible chance of success or not. That is not tomorrow, when we see the list of reforms,” the official said.
Agreement will be tricky, because the eurozone wants Greece to commit to major policy changes that go against what Tsipras and his Syriza party promised voters, notably on pension and labour market reforms.
“I don't see a possible conclusion if the Greeks don't make a very significant move in one or two or three areas,” the official said.
“It could be pensions, it could be the labour market but ... they have to pay the political cost. The Eurogroup wants to see that political cost being paid.”
If representatives of the creditors and Greece can agree on such reforms next week, eurozone finance ministers could endorse the deal at their May 11 meeting or at an extraordinary session a few days later if necessary.
“At best, there could be some kind of an interim statementon May 11 and then the completion of the review by the end of May or very early June,” the official said.
Once finance ministers declare there is a high probability of agreement and hence of disbursement of the reminder of the existing bailout, the ECB could lift limits on the amount of treasury bills Greek banks can buy. That would immediately ease the government's funding position, giving it some breathing space to negotiate a third bailout.
However, the official cautioned that talks on such a new programme would be even harder than on the current reform plan.