Greece ‘drafting’ deal terms

Greece and its creditors are starting to draft a technical-level agreement, a government official said yesterday, signalling progress in long-running talks to unlock aid for the cash-strapped country.

“At the Brussels Group [of credit negotiators] today procedures to draw up a staff-level agreement are beginning,” the official said, adding that prime minister Alexis Tsipras would be in constant touch with other leaders to conclude a deal.

The official said the deal would avoid wage and pension cuts, include reform of VAT and include a lower target for a primary surplus in the first year.

The statement appeared to suggest significant progress in talks with EU and IMF creditors that form the Brussels Group, though sources close to the lenders have so far not indicated any such progress to merit drawing up an agreement.

The Greek official also cited differences between the EU and IMF as holding up an overall deal and called on the creditors to do their part to ensure a deal was struck.

“There remains a problem with the differing stance among the institutions. If an agreement by the IMF was not needed, the deal would have closed by now,” the official said.

However, Greece’s European creditors said they cannot confirm the statement by Athens that it is starting the process of drafting a technical-level agreement with creditors to secure aid, an EU official told Reuters on yesterday.

“I wish it were true,” a senior eurozone official said.

European Commission vice-president Valdis Dombrovskis said yesterday that Greece and its international creditors were not yet at the point of drafting an agreement, reacting to the comment from a Greek government official.

The official said that the Brussels Group was beginning procedures to draw up a staff-level agreement. Reacting to this, Dombrovskis said: “We are working very intensively to ensure a staff-level agreement. We are still not there yet.”

Other officials in the eurozone, speaking to Reuters on condition of anonymity, were blunter. One called the Greek remarks “nonsense”. Another said: “I wish it were true.”

The European Central Bank, meanwhile, yesterday left the ceiling on emergency funding for Greek banks unchanged for the first time since February, maintaining pressure on Athens and its creditors to reach an aid-for-reforms deal. The move came as deposit outflows spiked again in the past week over fears Greece may default on a loan repayment to the IMF next month and worries over potential capital controls, bankers told Reuters.

A senior banker and a government official said liquidity conditions did not require raising the ceiling of the emergency liquidity assistance (ELA) funding from €80.2bn.

“The ECB will not be the one to unplug the respirator. It knows the tolerance and the buffers of the banking system and closely monitors the situation,” said one senior banker, declining to be named.

“It will lend support to any liquidity imbalance problem that emerges in the system, but will not provide comfort to the Greek state to play with its money via the ELA,” the banker added.

Greek banks have survived on the ELA since largely losing access to capital markets and the ECB’s less costly main funding window. They started tapping ELA in February.

A banking source said the ceiling was left unchanged because deposit outflows had slowed to low levels, leaving a sufficient liquidity cushion untapped.

Reuters