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Payment Deadline Renews Greece Deal Talks

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Greece Faces Tough Week of Decisions as IMF Waits

Talks on breaking the impasse over Greece’s financial lifeline took on new urgency as the nation faces a debt repayment at the end of this week with a deal to ease its cash crisis seemingly as far away as ever.

An international official said creditor institutions were working on a common proposal that would be presented to Greece as a way of breaking the deadlock in coming days. Technical negotiations on economic measures Greece must take were resuming at 3 p.m. Brussels time and an agreement is closer, though not ready, a government spokesman said on Monday.

Greece Ends Month Without Debt Deal

With discussions in their fifth month, deadlines have come and gone with meetings, calls and summits yielding little as disagreements over pensions and labor laws persisted. The difference now is that Greece must make four payments totaling almost 1.6 billion euros ($1.78 billion) to the International Monetary Fund this month starting on Friday, and its bailout package from the euro region expires at the end of the month.

“It’s truly crunch time for Greece,” Erik Nielsen, chief European economist at UniCredit, said in a note to clients. “A deal is coming, but it’s so tight time-wise that I would count on some bad arrears-related headlines before things calm down.”

Officials representing creditors spent the weekend working to converge among themselves on all issues related to the Greek bailout review, the official familiar with the matter said.

The common position may be communicated to Greek Prime Minister Alexis Tsipras by European political leaders, the person said, asking not to be named, as he wasn’t authorized to speak publicly on the matter.

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Merkel Involvement

German Chancellor Angela Merkel will likely be more involved as time runs out between this week and a meeting of euro-region finance ministers on June 18 in Luxembourg, the person said. According to the official, the agreement may be delivered by leaders, though will have been put together by the IMF, the European Central Bank and the European Commission.

With technical talks yielding no breakthrough, Tsipras is counting on the intervention of Merkel. He held a call with her and French President Francois Hollande on Sunday, with a German government official calling it “constructive.” Merkel and Hollande are scheduled to meet in Berlin on Monday.

Greece and its creditors traded accusations for a lack of progress on talks at the weekend, a hallmark of recent months.

Tsipras wrote in French newspaper Le Monde that any intransigence wasn’t the fault of his four-month-old administration. A senior German lawmaker said it was down to Greece to adhere to reforms agreed to before Tsipras took power.

‘Absurd Proposals’

“The lack of an agreement so far is not due to the supposed intransigent, uncompromising and incomprehensible Greek stance,” Tsipras said in the article published on Sunday. “It is due to the insistence of certain institutional actors on submitting absurd proposals and displaying a total indifference to the recent democratic choice of the Greek people.”

Financial markets in Athens were shut on Monday for the Orthodox Pentecost holiday. The yield on Greek 10-year bonds rose to 11.49 percent in London, up from 11.25 percent on Friday. Last week, it fluctuated between 10.95 percent and 11.98 percent as local reports of progress were followed by warnings from European officials.

Creditor institutions are seeking concrete action in areas including the pension system, labor market and sales tax.

Alexis Tsipras and Angela Merkel

Alexis Tsipras, Greece's prime minister, left, speaks as Angela Merkel, Germany's chancellor, listens during a news conference at the Chancellery in Berlin on March 23, 2015.

Krisztian Bocsi/Bloomberg

Tsipras said in his article that Greek plans for collective bargaining by unions adhere to norms in the euro region while reforms for retirees mandated by the country’s bailout agreement aren’t fit for a civilized country.

Budget Hurdle

The biggest hurdle is their insistence on additional fiscal measures of as much as 3 billion euros, a Greek official with knowledge of the matter said. The official asked not to be named, as negotiations are private and ongoing.

While Greece’s partners are aiming to keep the country in the euro, it’s up to the nation to meet the terms of its bailout, said Michael Fuchs, deputy parliamentary leader of Merkel’s Christian Democrat party. Greece is to blame for the crisis and it’s “fully not acceptable” for the government to accuse the European Union, he told Bloomberg Television.

Greece’s anti-austerity government has repeatedly expressed confidence that an agreement to unlock bailout funds and avert default is within reach, only to be rebuffed by officials representing the creditors. It’s said it can make the payment to the IMF due on June 5.

There’s also domestic politics in the mix: Greece’s appointed representative at the IMF, Elena Panaritis, said in a statement that she can’t accept the post because of the negative reaction from some lawmakers in the governing Syriza party.

Deposit Withdrawals

The standoff over the terms attached to emergency loans has triggered a liquidity squeeze and record deposit withdrawals, tipping the economy back into recession.

As the clock ticks, finance ministry officials have told Greece there’s no time to get a disbursement approved by the currency bloc’s parliaments unless they reach at least a technical agreement by the beginning of June.

“The Greek government would do well to act quickly because it is five to midnight for the Greek banks,” Andreas Dombret, an ECB Supervisory Board member, said in an interview with Bild Zeitung published Monday.

For more, read this QuickTake: Greece's Fiscal Odyssey

(Updates bond market in 12th paragraph.)
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