Greece's Creditors Leave Athens, Citing Progress on Accord

  • Negotiations continue on contingency measures needed for deal
  • Meeting of euro-area finance ministers may happen next week

Representatives of Greece’s international creditors are leaving Athens, saying they’ve made headway in discussions that could lead to the disbursal of more aid funds.

Euro-area, International Monetary Fund, and Greek officials “have made important progress on a policy package that should pave the way for discussions on the conclusion of the first review of the Greek program and debt sustainability,” European Commission spokeswoman Mina Andreeva told reporters in Brussels. The commission will continue to work on “the final elements of an overall policy package,” she said.

Greece has been locked in negotiations with its creditors over a demand that Athens legislate additional austerity steps equal to 2 percent of gross domestic product that would kick in if budget targets are missed. This is in addition to a package of “upfront” measures it agreed to as part of a July 2015 bailout. The latest assessment of its aid terms is already six months behind schedule, raising renewed doubts about whether it will secure emergency loans soon enough to avert a default in July when bonds held by the European Central Bank come due.

The yield on Greece’s $2.1 billion euros of 3.375 percent bonds due 2017 fell 54 basis points, or 0.54 percentage point, to 11 percent. Shares in Greece fell 0.15 percent after posting a 2.5 percent loss on Wednesday.

Greece and its creditors have nearly sealed an agreement on the package of upfront measures, which includes pension-system and income-tax reform and how to treat non-performing loans of the banking sector, leaving the two sides to work on the contingency proposals. This remains the focus, European Commission Vice President Valdis Dombrovskis said after meeting Italian Finance Minister Pier Carlo Padoan in Rome on Thursday.

“All institutions will continue to work from headquarters with the authorities and member states on the final elements of an overall policy package,” the ECB said in an e-mailed statement.

Creditors disagree over how to incorporate into Greek law a contingency proposal, which was demanded by the IMF. While the fund’s Managing Director Christine Lagarde has called for the measures to be “legislated upfront,” the European Commission wants a “mechanism” that could trigger steps at a later date, European Economic Affairs Commissioner Pierre Moscovici said.

“A mechanism is a way to have measures if necessary, but in our view we should not have a precise, detailed set of measures,” Moscovici told reporters in Brussels. “We need to have a mechanism which shows very precisely how those measures will be taken if necessary.”

‘Feasible Mechanism’

With the mission chiefs leaving Athens on Thursday, negotiations on the contingency steps will continue in an effort to fulfill “the letter and the spirit” of Greece’s aid agreement even though European Commission President Jean-Claude Juncker has said he believes that the upfront reforms are “enough,” Andreeva said.

“If others are of the opinion that contingency measures are needed and they are proposed, we are ready to assess them in close cooperation with the Greek government,” Andreeva said. “This has now been agreed so of course the commission is cooperating loyally and working out a feasible mechanism that would not unnecessarily dampen Greek economic growth.”

Jeroen Dijsselbloem, the Dutch finance minister who leads the group of his euro-area counterparts, said late Wednesday he doesn’t want to convene a meeting to discuss the Greek issue until negotiators have a strong basis for an agreement.

“Next week, or ultimately the week after,” ministers will gather if necessary, he said, after a meeting with French Finance Minister Michel Sapin.

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