Greece Said to Approach Accord for Bailout Tranche Payment

Greek Parliament
Photographer: Yorgos Karahalis/Bloomberg
  • Government submits legislation required by creditors
  • Negotiations continue ahead of ECB Governing Council meeting

Greece is close to an accord with creditor institutions on measures needed to get its next bailout tranche, two people familiar with the negotiations said, as the government submitted amendments to parliament Wednesday to bring legislation in line with what euro-area nations requested.

On May 25, the Eurogroup of the currency bloc’s finance ministers asked for “corrections to the legislation on the opening up of the market for the sale of loans, and on the pension reform,” as well as the conclusion of pending actions related to privatizations before approving the disbursement of a sub-tranche of a 7.5 billion-euro loan ($8.4 billion).

The differences relate to “minor things that will be taken through to parliament and other things that have to do with secondary legislation,” Greek Minister of State Nikos Pappas told reporters in Brussels on Tuesday. “We are very, very close and nobody should worry about any delays,” said Pappas, who is the closest aide of Greek Prime Minister Alexis Tsipras.

A spokeswoman for the European Commission didn’t immediately reply to a request for a comment and a spokesman for the European Stability Mechanism declined to comment. The commission and the ESM are among the international budget supervisors of Greece.

A deal would mark a major step for Greece, not just allowing it to meet debt payments this summer, but also paving the way for the European Central Bank to restore some access for the country’s banks to regular refinancing operations after 15 months of total reliance on expensive Emergency Liquidity Assistance. A successful conclusion of the negotiations is also a key condition for Europe’s most indebted state to include its government bonds in the ECB’s asset-purchase program.

Progress in talks -- following last year’s edge-of-the-cliff diplomacy that pushed the country to the brink of a euro exit -- has dispelled some investor fears about an imminent repeat of the drama, prompting a rally in Greek stocks and bonds.

Markets Rally

The Athens Stock Exchange has delivered the highest returns in dollar terms out of all primary equity indexes tracked by Bloomberg over the past month. Bank stocks gained almost 21 percent in May, as investors priced in a reinstatement of the ECB’s waiver, which will allow lenders to regain access to cheaper financing and restore growth-boosting confidence in Greece’s economy.

Greek bonds have been rising, delivering the highest returns of all sovereigns tracked by Bloomberg’s World Bond Indexes, over the past month. The yield on the 3.375 percent note due July 2017 dropped 45 basis points to 6.94 percent at 5 p.m. in Athens on Wednesday.

An international official involved in the talks with the Greek government said Wednesday the main issue outstanding was whether to allow the sale of government-backed loans from banks to distressed debt funds. All other issues, including the potential to privatize Greece’s electricity grid operator, had essentially been resolved, the official said, asking not to be named, in line with policy. Given progress so far, talks can conclude on substance within days and disbursement of the next loan tranche can take place within two weeks, the official said.

A separate Greek official said the Governing Council of the ECB meeting in Vienna on Thursday will discuss reinstating the waiver for Greek banks only if the negotiations on remaining prior actions for the conclusion of the bailout review are completed on time. The official asked not to be named, as he wasn’t authorized to speak publicly on the matter. An ECB spokesman declined to comment on the Governing Council’s agenda.

“There should be no talk anymore about Grexit because it doesn’t make sense any more,” Luxembourg Finance Minister Pierre Gramegna said in a Bloomberg TV interview on Wednesday. “We have agreed on the re-adjustment of the debt for Greece in the medium- and long-term, which means there is some alleviation there. I think it’s a win-win situation.”

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