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Greece Hits Crunch Month as Tsipras Warns Bell Tolls for All

Monday, 01 Jun 2015 08:26 AM

Greece and its creditors traded accusations for a lack of progress on talks as alarm bells sounded over the country's financial course at the start of a crucial month.

As another of the government's self-imposed deadlines for securing a deal slipped away, disagreements between the two sides on budget targets persisted, a person familiar with the matter said. Greece must make four payments totaling almost 1.6 billion euros ($1.78 billion) to the International Monetary Fund this month and its bailout package backed by the euro region expires at the end of June.

While Prime Minister Alexis 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. An international official, who asked not to be identified, said creditors were discussing a deal to be presented to Greece as a way of ending the impasse.

"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."

Sticking Points

With technical talks yielding no breakthrough, Tsipras is seeking the intervention of German Chancellor Angela Merkel and French President Francois Hollande. The three leaders held a call on Sunday to discuss what happens next, with a German government official calling them "constructive." Merkel and Hollande were scheduled to meet in Berlin on Monday.

Financial markets in Athens were shut on Monday for the Orthodox Pentecost holiday. The yield on Greek 10-year bonds was little changed at 11.30 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.

With talks now in their fifth month, creditor institutions are seeking concrete action in areas including the pension system, labor market and sales tax.

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.

Officials representing creditors spent the weekend working to converge among themselves on all issues related to the Greek bailout review, a person familiar with the matter said. The common position may be communicated to Tsipras by European political leaders, the person said, asking not to be named, as he wasn't authorized to speak publicly on the matter.

Merkel Calls

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.

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. There's also domestic politics in the mix: Greece's appointed representative at the IMF, Elena Panaritis, said in an e-mailed 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.

"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.

Government spokesman Gabriel Sakellaridis had told reporters in Athens on May 28 that a deal with creditors could be reached by Sunday. The day, like many previous dates in recent weeks, came and went.

Failure to strike an agreement risks leaving Europe's most indebted state unable to meet its debt obligations.

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.

Economy Minister George Stathakis said in an interview with Italy's Corriere della Sera that he expects a "technical solution" with creditors "in a few days." The accord would be followed by a meeting of euro-area finance ministers to free up resources. Stathakis reiterated that there will be no problem with the first payment due to the IMF on June 5.

In his Le Monde article, Tsipras said coming up with a solution is vital for all of Europe.

"If some, however, think or want to believe that this decision concerns only Greece, they are making a grave mistake," he wrote. "I would suggest that they re-read Hemingway's masterpiece, 'For Whom the Bell Tolls.'"

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Greece and its creditors traded accusations for a lack of progress on talks as alarm bells sounded over the country's financial course at the start of a crucial month.
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