Greece’s Protracted Bailout Dispute Sends Tsipras to Parliament

Updated on
Greek Stalemate Persists

Greek Prime Minister Alexis Tsipras will address lawmakers on Friday as protracted talks over a financial rescue risk creating friction within his anti-austerity party as well as with creditors.

After meeting in Brussels with European Commission President Jean-Claude Juncker, Tsipras stuck to his position that any basis for an accord must be a Greek proposal. Citing a draft document, German newspaper Tagesspiegel reported the plan includes extra tax for companies and higher earners. A government spokeswoman declined to comment.

Four months of deadlock looked closer to ending this week after a flurry of activity starting with European leaders and the International Monetary Fund meeting in Berlin on Monday night and culminating with Tsipras heading to Brussels. He will speak to parliament in Athens at 6 p.m. local time on Friday with the euro region pressing for an agreement to be wrapped up by June 14, according to a Greek official.

“His main concern is how to control his party, because there are diverse views within the party,” Christopher Pissarides, Nobel Prize-winning economist and professor at the London School of Economics, told Bloomberg Television. “Even if he is prepared to do something, to give some concessions, there will always be some faction within the party that will not want to give it.”

Making Progress

After the meeting with Juncker and Dutch Finance Minister Jeroen Dijsselbloem, who also heads the group of his euro-area counterparts, Tsipras reiterated both sides can’t “make the same mistakes, the mistakes of the past.”

Juncker said more work needs to be done for the two sides to reach an agreement. Greece is aiming to get hold of money from its existing bailout, which expires this month.

Greek Prime Minister Tsipras Says Agreement in Sight

“We made some progress yesterday night, not sufficient, but nevertheless trying to put together the elements proposed by our Greek colleagues and friends and our own ideas,” Juncker said at a conference on Thursday.

IMF Managing Director Christine Lagarde said she welcomed Wednesday’s “constructive meeting” between the Greek prime minister and European Union officials.

IMF Payments

Without access to capital markets, the country has to meet four payments to the IMF totaling about 1.5 billion euros ($1.7 billion) in June, while its euro-area-backed bailout also expires this month. The first one is due on Friday, and Tsipras signaled in Brussels that Greece will meet it.

Greek markets reflected the varying expectations regarding a conclusion of a deal. Bonds rose, with the yield on the government’s two-year security extending this week’s decline by 13 basis points to 22.6 percent. The Athens Stock Exchange Index fell 1.3 percent after rising 4.1 percent on Wednesday.

There has been “certain convergence in certain areas,” but “there were certain areas where still opinions vary,” European Commission spokesman Margaritis Schinas said on Thursday. Juncker, Dijsselbloem and Tsipras will meet again in coming days, though no date has been set, he said.

Discussion Basis

Tsipras said demands by the euro area and the IMF for cuts in the income of poor pensioners and increases in value-added tax on power are unacceptable, highlighting what have been red lines in Greece’s stance since his anti-austerity Syriza party swept to power in snap elections in January.

“Ideas like cutting benefits for low-income pensioners, or raising the VAT rate for electricity by 10 percentage points, can’t be a basis for discussion,” he told reporters in the small hours of Thursday in Brussels.

Tagesspiegel reported that the draft proposal presented to Juncker envisaged 1 billion euros coming from company taxation and an increase in rates for the so-called solidarity tax. The newspaper didn’t say how it obtained the document.

Creditors want the targets for the primary budget surplus - - the budget balance excluding interest payments -- to be 1 percent of gross domestic product this year, 2 percent of GDP in 2016, 3 percent in 2017 and 3.5 percent in 2018, said the Greek official, who called these proposals a “good basis” for further deliberations on the matter.

Tsipras said both sides were “very close” to an agreement on the targets for the primary surplus.

http://www.bloomberg.com/graphics/2015-greece-default/embed20150604.html

Before it's here, it's on the Bloomberg Terminal. LEARN MORE