25th June 2015
The apparent lack of any progress at Wednesday’s meeting of eurozone finance ministers has left the prospect of a deal between Greece and its creditors “hanging by a fine thread”, claims Capital Economics.
Greece’s prime minister Alexis Tsipras recommenced negotiations with the embattled nation’s creditors on Thursday but time is running short as it must repay a €1.6bn (£1.1bn) loan to crisis lender the International Monetary Fund (IMF) by the end of the month of face defaulting
Jonathan Loynes, chief European economist at Capital Economics said: “Following the optimism earlier in the week that an agreement was very close, it has become clear that there are still major differences between the two sides. The copy of Greece’s latest proposals, leaked yesterday, was covered in amendments from the creditors on long-standing areas of contention such as pensions. Meanwhile, Greek officials have described the creditors’ counter-proposals as ‘Armageddon’.”
According to BBC News, the latest proposals put forward by Greece are thought to include new taxes on businesses and the wealthy, VAT increases, but no further reductions in pensions or public-sector wages.
Greek PM Alexis Tsipras is meeting the ECB’s Mario Draghi and IMF’s Christine Lagarde this morning, before the Eurogroup reconvenes at later today in “order to prepare for” the European Council, which starts later.
With the current bailout expiring on Tuesday, a deal needs be approved by over the next few days in order for the final €7.2bn in bailout funds to be released in time to make the payment to the IMF.
Loynes however believes that scenario appears extremely optimistic. He added: “Overall, we put the chances of a deal in the next few days at close to 50/50. But the key point that we have stressed many times is that it is likely to be only a temporary stop-gap. Without a substantial form of debt relief – which looks unlikely in an initial agreement – Greece’s debt ratio will remain unsustainably high and the crisis will continue.”