Tsipras Seeks French Help to Release Money From Bailout

  • Greek leader meets Hollande in Paris on Wednesday night
  • Talks with creditors on pause for IMF's Washington gathering

Greek Prime Minister Alexis Tsipras will seek help from French President Francois Hollande after talks between his government and its creditors failed -- again -- to produce the approval needed to release funds from his country’s third bailout.

Tsipras will meet his French counterpart in the Elysee Palace at 7 p.m. Paris time with Greek officials still struggling to convince inspectors from the European Commission, the European Central Bank, the European Stability Mechanism and the International Monetary Fund to sign off on the first review of the rescue program. Staff from the creditor institutions are taking a week-long break from their talks in Athens to attend an IMF meeting in Washington.

“The government is once again employing its usual tactics in trying to raise the negotiation to a more political” level, in a bid to bypass technocrats’ objections, Paris Mantzavras and George Grigoriou, analysts at Athens-based Pantelakis Securities, wrote in a note to clients Wednesday.

Hours before Tsipras’s Paris trip was announced on Tuesday, Finance Minister Euclid Tsakalotos said the government will submit bills on tax and pension reforms to parliament next week, even though they haven’t been approved by creditors. Tsipras pledged not to take “unilateral” actions when he signed his country’s latest bailout agreement last year. Tsakalotos is aiming to get the creditors to endorse changes to pensions, taxation and management of non-performing loans before euro-area finance ministers meet on April 22.

Discussions on the review continue, and the Commission expects engagement and swift progress on all fronts, spokesman Alexander Winterstein told reporters in Brussels on Wednesday. The European Union’s executive arm “takes note” of the Greek government’s intention to bring “certain texts” to parliament.

“What happens at a technical level is always secondary, the music is elsewhere,” Greek Minister of State Nikos Pappas, Tsipras’s closest aide, said in an interview last week. “Many countries have an interest in keeping Greece stable.”

Market Reaction

The failure to reach an agreement has weighed on Greek assets. The Athens Stock Exchange is the worst performing of all major equity gauges tracked by Bloomberg in April while Greek bonds are the second worst performers this year, after Portugal.

Greek stocks and bonds fell on Wednesday, with the ASE index closing 0.8 percent lower and yields on 2-year notes rising 115 basis points to 12.31 percent as of 5:30 p.m. in Athens.

Officials in the Greek capital say the review has been delayed because the IMF doesn’t think Tsipras’s proposals for additional budget savings go far enough and takes more a pessimistic view of the economic economy than the European Commission.

The solution to the struggle over Greece’s third bailout program must be based on last summer’s agreement between the Greek government and its creditors, according to German Finance Ministry spokesman Martin Jaeger. “We will adhere strictly to the procedures,” Jaeger told reporters in Berlin on Wednesday.

Debt Burden

European Economic Affairs Commissioner Pierre Moscovici said he will seek progress on reducing Greece’s debt burden, a bone of contention between the IMF and the euro area, at the meetings in Washington, according to an interview in Le Monde newspaper published Tuesday. European Stability Mechanism chief Klaus Regling said Tuesday that Greek reforms can help it reach debt sustainability without nominal haircuts on its loans.

Tsakalotos said Tuesday that Greece is still a sovereign nation and will make its own decision about how to reach its budget goals. The two bills on taxes and pensions will each yield budget savings of 1 percent of gross domestic product. “We want an agreement that satisfies all the creditors but also covers our red lines,” he said.

The draft bills will be open to comments and modifications arising from public consultation and discussions with bailout auditors, a Greek government official said in an e-mailed statement Wednesday, asking not to be named in line with policy.

“The risk is that Tsipras may decide to drag on the talks until the large debt payment to the ECB on 20 July is looming,” Wolfango Piccoli, an analyst at Teneo Intelligence in London, said by e-mail. “This would be a risky strategy though, reminiscent of last summer’s unexpected referendum move.”

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