Greece and Lenders in Final Push to Seal New Bailout

Greece is reportedly close to striking a bailout deal with its international creditors

by

    Published on Aug 10, 2015 at 12:19 PM

    By Lefteris Papadimas and Michele Kambas

    ATHENS (Reuters) - Greece and international creditors sought to put final touches to a multi-billion euro bailout accord on Monday to keep the country financially afloat and meet an important debt repayment to the European Central Bank within days.

    Germany set out "strict" conditions for further aid and said it would be sensible to link the size of the first tranche to Greece's progress in carrying out reforms, a reflection of worry around the euro zone that Athens might not do as promised.

    Greek ministers and representatives of European institutions and the International Monetary Fund resumed talks on Monday morning after a marathon Sunday session that ended in the pre-dawn hours.

    An accord for up to 86 billion euros ($94 billion) in fresh loans to the debt-stricken nation must be in place by Aug. 20, when the repayment to the ECB is due. Greek bond yields fell as hopes grew of a speedy end to talks. [GVD/EUR]

    An agreement would mark the end of a painful chapter on bailout talks for Greece, which fought against austerity terms demanded by creditors for much of the year before accepting a deal under the threat of being bounced out of the euro zone.

    "From 12 midnight, the two sides started the final stretch, ‎discussing the final stretch - combing through the final text, sentence by sentence, word by word," a Greek finance ministry official said.

    Greek officials had earlier said they hoped to conclude negotiations with creditors by early Tuesday at the latest. The European Commission said it anticipated a deal this month.

    "A deal is feasible. A deal can be reached in the month of August, preferably before Aug. 20," European Commission spokeswoman Annika Breidthardt said.

    150810tsipras1
    Greek Prime Minister Alexis Tsipras in central Athens, Greece, August 5, 2015. REUTERS/Yiannis Kourtoglou

    Greek banks could get an initial capital injection soon after a bailout deal is clinched, as much as 10 billion euros, even before the ECB completes a stress test, a euro zone official familiar with the issue said on Monday.

    The official, who asked not to be named, said a test may not be finished before October but that it was recognized the Greek banks need urgent capital to normalize their operations.

    Germany on Monday stressed its wish for "quality before speed" in the negotiations, threatening to slow down the process as it pressed for strict conditions to be linked to aid.

    Popular misgivings run deep in Germany, the euro zone country that has already contributed most to Greece's two bailouts since 2010, about funneling yet more money to Athens.

    GERMANY'S "STRICT" TERMS

    Germany wants a deal that includes an ambitious budget plan, a credible privatization strategy and a sustainable pension reform by Greece, Finance Ministry spokesman Juerg Weissgerber told a regular news conference in Berlin.

    "It is sensible - that is our belief - to fix the size of the first payment tranche to the extent of the reforms implemented," he said. "That means strict conditionality for financial help."

    Weissgerber said Germany was not involved in the negotiations and would need time after any deal to review the results. "We are ready to do this examination quickly this week if necessary, but quality comes before speed," he said.

    Greek officials have said they expect the bailout accord to be approved by Greece's parliament on Wednesday or Thursday and then vetted by the Eurogroup -- finance ministers of the euro zone -- on Aug. 14, paving the way for aid disbursements.

    The bailout pact will be voted on in parliament as one bill with two articles - one on the loan agreement and memorandum of understanding and the second on the so-called prior actions that must be completed for aid to be released, another Greek official said. The negotiations began on July 20.

    Greek media reported that some of the prior actions included scrapping tax breaks for farmers who now receive subsidized fuel, tighter regulations on individuals owing backtaxes to the state, and a gradual increase in a "prepaid" income tax mechanism that asks taxpayers ranging from the self-employed to small businesses to cough up lump tax sums on forecast income.

    The two sides have agreed to set a budget surplus target before interest payments of 0 percent this year, and expect the economy to shrink between 2.1 and 2.3 percent, a Greek official told Reuters.

    Greece's economy returned to recession this year, hammered in part by the imposition of capital controls and a three-week shutdown of banks in June-July as the bailout talks dragged out tortuously without resolution. Industrial output data for June pointed to a 4.5 percent decline from a year earlier, underlining the economic hit from prolonged political turmoil.

    EU officials have said the size of the overall bailout has been a sticking point. From the Greek side, Greek sources said a key issue of concern was how to deal with a mountain of non-performing loans in the banking sector, a factor likely to weigh on a potential recapitalization bill for the banks.

    Athens wants to set up a "bad bank" to handle this, while creditors want non-performing loans bundled and sold to distressed asset funds. Non-performing loans represented about 35 percent of overall loan portfolios in the first quarter of 2015, a level likely to increase because of the recent imposition of capital controls to stop a run on Greek banks.

    ($1 = 0.9127 euros)

    (Additional reporting by George Georgiopoulos, Jan Strupczewski in Brussels, Paul Carrel and Tina Bellon in Berlin; Writing by Michele Kambas; Editing by Mark Heinrich)


    A Schaeffer's exclusive!

    The Expert's Guide

    Access your FREE trading earning announcements before it's too late!


     
     

    Partnercenter


    NEW! Explore Schaeffer’s Partners' deals and get connected to top online brokerages with deals tailored exclusively for our readers.  Get answers to your questions regarding transfer fees, commission rates, programs and available discounts related to online trading services.

    MORE | MARKETstories


    Look Who's Going Bankrupt Next in America
    Porter Stansberry is making a concerning prediction.
    First Week in April Provides More Coronavirus-Related Volatility
    A slew of coronavirus-related news sent markets on another weekly roller coaster ride
    Netflix Stock Heading into Historically Bullish Quarter
    NFLX's 10-day moving average has stepped up as support lately
    The Latest Investor's Guide to Precious Metals
    Learn how to protect savings and maximize returns by investing in precious metals.