Greece Remains More Optimistic Than Its Creditors

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Greece once again expressed optimism that the country will reach a deal with creditors in the coming days, only to have that confidence knocked down by international officials.

The most recent vow came Thursday from the government’s chief spokesman -- who said an agreement could be hammered out by Sunday -- even as the International Monetary Fund and other creditors insisted that much work remains to be done.

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“This optimism is not just words, it is based on the experience of the previous weeks and the progress achieved,” spokesman Gabriel Sakellaridis told reporters in Athens. “In cooperation with creditor institutions and our partners, we are making sure that there won’t be a chance of default.”

Prime Minister Alexis Tsipras’s government has promised on a number of occasions in past months that it was close to sealing a deal --- most recently at the end of April when Greek officials argued an agreement could be reached by May 3 -- only to have no accord come to pass. As the deadlines come and go, Greece has managed to scrape together enough funds to pay the bills and limp along.

“Greek governments have generally tended to over stress the prospects of review conclusion over the last few years and the new Syriza-led government is no exception to the rule,” said Lefteris Farmakis, an analyst at Nomura International Plc in London. “There is little evidence of substantial progress on a number of key review issues.”

Credible Target

The IMF won’t support a bailout deal unless Greece establishes a credible target for a medium-term budget surplus backed by changes to its pension system and other reforms, said an official involved in the Group of Seven talks taking place in Dresden, Germany.

Greece and its international creditors remain far apart in talks to unlock aid payments, said the official, who briefed reporters on condition of anonymity because the discussions are confidential. Euro-area countries may need to offer debt relief as part of a solution that lowers the country’s burden to a sustainable level, the official said.

“We are all in the process of working so I would not say that we have achieved results, that we are close to the end of the process,” IMF Managing Director Christine Lagarde said in interview with Germany’s ARD television network broadcast Thursday. “We are in the process.”

Whipsaw

The back-and-forth between Greece and creditors has been a whipsaw for markets. Greek stocks rose as much as 3.8 percent on Wednesday, after a government official said work had begun on drafting a staff level agreement with creditors. Thursday, the benchmark Athens Stock Exchange closed down 1.7 percent as European officials rebuffed Greek reports of an imminent deal.

German Chancellor Angela Merkel and French President Francois Hollande, in an effort to jump-start the stalled negotiations, said last week that they were aiming for a deal by the end of May, only to say after talks with Tsipras that more work was needed. While the Greeks say that goal is still possible, European officials said Wednesday the end of May target is no longer reachable.

The new timeframe being discussed for a deal is before June 5, when Greece is set to make the first of about 1.6 billion euros ($1.75 billion) in IMF payments coming due in the next three weeks. Whether that really is a hard deadline is impossible to say because no one outside Athens knows exactly how much money Greece still has.

One option being tossed around by analysts is bundling the June payments to the IMF into one transfer and making it when the final one is due -- essentially buying a couple of weeks time. Sakellaridis said Thursday that this option isn’t being explored.

“We are making progress but there is still lots of work to be done,” Valdis Dombrovskis, the European commissioner in charge of euro matters, told reporters in Brussels. “This work is now really going on very intensively.”

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