European policy makers expressed confidence that a deal with Greece was within reach after Prime Minister Alexis Tsipras’s government submitted a last-minute set of proposals they said could end a five-month standoff over aid.
Greek stocks and bonds surged as officials meeting in Brussels on Monday said that progress had been made toward meeting the terms of creditors, including in the contentious areas of pensions and revenue. While the set of reform measures was delivered too late for a full appraisal by euro-area finance chiefs, unlike prior proposals it wasn’t rejected out of hand and officials said it could form a basis for a deal.
“I’m of the opinion that we’ll achieve an agreement with Greece this week,” European Commission President Jean-Claude Juncker told reporters in Brussels after meeting with Tsipras. “This won’t be easy, we will work at this -- just like we did over the last two days and nights -- but my goal still is that by the end of the week we’ll find an agreement.”
Attention now shifts to an emergency summit of leaders from the 19 euro countries later on Monday, when Tsipras will have a chance to put his case to German Chancellor Angela Merkel and French President Francois Hollande. With work still to do to flesh out the Greek proposals, a second, scheduled summit beginning Thursday is the more likely forum for a deal.
Greek stocks extended an earlier rally with the Athens Stock Exchange Index closing 9 percent higher, its biggest gain on a closing basis since Feb. 3. Greek government bonds also advanced, with the yield on the two-year bond falling 511 basis points to 23.8 percent. The 10-year yield fell 150 basis points to 11.2 percent.
The Greek government said its proposals included steps to eliminate early retirement options, as well as hiking the sales tax, increasing tax surcharges that middle- and high-income earners pay and introducing a levy on companies with annual net income of more than 500,000 euros ($568,000).
Dutch Finance Minister Jeroen Dijsselbloem, who chairs meetings of his euro-area counterparts, told reporters that the package submitted by Athens was “broad and comprehensive” and a positive step.
Finance ministers asked the three creditor institutions -- the European Central Bank, the International Monetary Fund and the European Commission -- to work with Greek authorities and “start immediately on these proposals,” said Dijsselbloem.
With the clock running toward a June 30 deadline to make IMF payments and work out a new aid deal after months of fruitless negotiations, avoiding imminent default may be the first of Tsipras’s challenges.
Even if he reaches a tentative agreement this week, he’ll still need the support of the parliament in Athens, which is dominated by lawmakers from his Syriza coalition opposed to austerity measures such as pension cuts. While a deal would present a victory for Tsipras, it might only serve as a stop gap, with Greece likely to need additional aid later this year.
For now, work will begin immediately to comb through the Greek reform measures, Dijsselbloem said. That means “going through them, getting all the specifics, make calculations on them and work on a list of prior actions which is the key thing that is all boils down to,” he said. “It’s an opportunity to get a deal this week and that’s what we’ll work for.”