GREECE PUSHED BEYOND LIMITS; ALL OPTIONS OPEN

Talks in Paris have failed to provide a feasible plan for Greece’s future


Representatives of the Greek government and its international creditors left Paris with little to show after failing to break a deadlock over Greece’s future financing in talks that ran deep into the night.

 
The annual ritual of haggling over budget numbers, a feature of Greece’s scrutiny since its 2010 bailout, took to the road this year with two rounds of negotiations in the French capital that broke up yesterday.

 
While the backdrop may have changed from the concrete block of the Greek Finance Ministry ringed with Athens protesters to a leafy private street off the Avenue Foch, the bleary eyes after all-night deliberations that yielded few results remained very much the same.

 
“Huge consumption of coffee, occasionally sandwiches or souvlaki accompanied by a can of beer; exchange of arguments — sometimes interesting, sometimes tedious and repetitive” are the order of the day, or rather night, Panos Tsakloglou, who has first-hand experience of the talks, said in an e-mail.

 
Tsakloglou was Greece’s representative in the working group of senior euro-area finance ministry officials until June and is now a professor at the Athens University of Economics and Business.

 
In this round, neither side was prepared to accept the arguments of the other, meaning that an impasse over freeing up the last tranche of the country’s bailout remains in place.

 
Stocks Down

 
The failure to seal a deal led Greek shares down 3.1 percent on the Athens Stock Exchange at 11:35 a.m. local time today. Greece’s three-year bond yields rose 41 basis points to 7.67 percent.

 
Greek Prime Minister Antonis Samaras is pushing for an exit to the 240 billion-euro ($300 billion) bailout at the end of the year, a goal that would make this the final review of Greece’s compliance with the terms agreed with the troika of officials representing the European Commission, the European Central Bank and the International Monetary Fund.

 
For that ambition to be realized, the current review must be completed by year’s end, which realistically means by Dec. 8, when euro-area finance ministers meet in Brussels for the last time this year. Greece’s lenders have said that completing the review is a condition for negotiating a credit line, which will replace regular bailout disbursements as of January.

 
Sticking Point

 
The major sticking point between the sides going into the talks was the troika’s insistence that Greece needs to find about 2.5 billion euros in additional budget cuts to meet its fiscal targets for next year. That issue remained unresolved at the end of the talks in Paris, which also didn’t settle on a date for the troika to return to Athens to complete the review, a Finance Ministry official said after the meeting.

 
“We will be continuing our dialogue intensively, and we’re now working to successfully complete the review,” Declan Costello, the European Commission’s mission chief for Greece, told reporters after the talks, held at Greece’s representation to the Organization for Economic Cooperation and Development.

 
Greece has consistently met its fiscal targets in the past years, and the government feels that it is being punished for this success, a senior Greek government official said after the failure to seal a deal in Paris. While Italy and France persistently ignore agreed-upon European Union budget-deficit rules, the troika is attempting to make an example out of Greece, according to the official, who asked for anonymity because talks between the government and the troika are private.

 
‘Implausible’ Claim

 
The troika’s claim that there’s a 2.5 billion-euro-wide fiscal hole “seems implausible,” said Tsakloglou, who had to fight off identical demands to plug a non-existent gap a year ago. He said the creditors were probably extrapolating from current figures, and “disregarding the fact that by design several taxes are expected to be collected in the coming months.”

 
The government will not, under any circumstances, discuss an extension to the current bailout of six months or a year — nor the strings attached, said the government official. Greece could only accept a technical extension of as much as one month to allow enough time for completion of the current review, the official said.

 

The impasse over completing the review by next month, or agreeing on the extension of the current bailout risks leaving Europe’s most indebted state without a backstop as of Jan. 1.

 
As delegations from Greece and the troika return to their respective homes in Athens, Brussels, Washington and Frankfurt, they can look forward to the next round of negotiations. Until then, they’ll always have Paris.

 

 

Bloomberg has contributed to the article / Nov. 27, 2014

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