• Government expects agreement on emergency loans by next month
  • Greek Minister of State Nikos Pappas speaks in interview

Greece said it’s aiming for an agreement with creditors on the next tranche of emergency loans by the beginning of May as German Finance Minister Wolfgang Schaeuble sought to play down debt relief expectations.

“We have almost identical estimates with the European Commission,” Minister of State Nikos Pappas, Prime Minister Alexis Tsipras’s closest ally in the government, said in an interview in Athens. “And what needs to be done in the following days is to turn the almost identical into identical,” he said late on Friday, ahead of frantic negotiations between the government and officials representing creditor institutions that failed to find a deal.

Nikos Pappas
Nikos Pappas
Photographer: Chris Ratcliffe/Bloomberg

Bailout auditors from the European Union’s executive arm, the euro area’s crisis fund, the European Central Bank and the International Monetary Fund have been holding another round of talks with government officials in Athens for the past week to discuss policy measures attached to the country’s bailout. The biggest area of contention is the management of bad loans burdening bank balance sheets, Pappas said, with their positions closer on a pension system overhaul and income tax reform.

“We’ll find a solution in the coming weeks,” Schaeuble said Sunday in an interview with German public television channel ARD. This solution “has nothing to do with debt forgiveness, but with the fact that Greece needs to do more” to return to a competitive economy, he said.

Ice Cream Promise

Greek bonds have gained on expectations of an agreement, delivering the best returns of all European sovereign securities tracked by Bloomberg’s World Bond Indexes in the past month. Greek stocks rose 0.2 percent at 1:07 p.m. in Athens on Monday.

“They’ll reach an agreement at the very last second, as always,” said Alexander Kritikos, an economist at the Berlin-based DIW economic institute. “I don’t expect that the necessary will be done, namely to try to tackle the issue of structural reforms with this Greek government,” Kritikos told reporters Monday in Berlin.

The first review of the country’s latest bailout was originally scheduled to conclude at the end of last year. Pappas attributed the delay to the IMF disputing the effectiveness of Tsipras’s proposals for additional budget savings and its more pessimistic view of the Greek economy. The IMF also doesn’t offer any additional leverage on Greece’s calls for debt relief, as this is a commitment already included in the country’s agreement with the euro area, Pappas said.

“The IMF asks for salary cuts in the public sector, lifting restrictions on layoffs, cuts to main pensions, measures that will kill the economy and kill the very usefulness of a debt cut, which by the way, they can’t even guarantee,” he said. “It’s like they’re asking us to jump from the fifth floor and they promise that someone will buy us ice cream.”

WikiLeaks Dispute

Relations between the two sides turned sour this month after the government accused the Washington-based fund of banking on a credit event to force Greece to accept its positions. Greece cited the transcript of a conference call between IMF officials published by WikiLeaks. The Fund’s managing director Christine Lagarde called the accusations “nonsense” and hinted Greek authorities were responsible for the leak in a strongly worded letter to Prime Minister Alexis Tsipras.

“I deny engaging in such a conversation,” Pappas said when asked to comment on whether the government was involved in the recording of the IMF call. “The issue isn’t whether Mrs. Lagarde thinks that the allegations about the IMF banking on a credit event is nonsense, the issue is that it remains to be seen,” he added.

The Fund keeps saying that the numbers must add up but the “numbers of the IMF almost never add up,” Pappas said in his office, where he displays a front-page of the Italian leftist newspaper L’Unità from 1984 reporting on the death of that country’s communist leader Enrico Berlinguer.

Tsipras’ left-wing Syriza currently governs in coalition with the nationalist Independent Greeks party and Pappas said there’s no reason to ditch the alliance. He added though that he expects support for the government to expand after striking a deal with creditors. “There are parties which are potentially on the left, progressive side of the political spectrum,” which could offer support to Tsipras, he added.

“Greece cannot just continuously tag along and expect that things will be sorted out,” Lagarde said in an interview with Bloomberg Markets published Monday. “The Greek leaders will need to take more ownership of reestablishing their country.”

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