Deal or default? All bets are off on Greece's debt talks

GMT 16:38 2015 Wednesday ,15 April

Arab Today, arab today Deal or default? All bets are off on Greece's debt talks

Greece can strike a deal
Athens - AFP

Some are convinced that a deal will be done between Greece and its creditors to unlock vital bailout funds while others are betting that the cash-strapped nation will default and be jettisoned from the eurozone.

As negotiations between Athens and its creditors hurtle to the April 24 deadline, the only thing that is clear is that the Greek government's coffers are emptying out in the meantime.

Athens therefore desperately needs a deal with its creditors to unlock 7.2 billion euros ($7.6 billion) -- the last tranche of a 240-billion-euro bailout accorded in 2010. But the lenders are holding out for better reforms from Athens.

Greece's public balance sheet also appears to be in a worse shape than thought, as official data showed Wednesday that the deficit was more than twice as wide as forecasted.

The budget deficit reached 3.5 percent of GDP in 2014, although the government that preceded the radical leftist government elected in January had forecast a deficit of 1.3 percent of GDP, while the European Commission's forecast was 1.6 percent.

The Greek government is expected to put a new list of reforms to its eurozone partners within days as eurozone finance ministers are due to discuss them on April 24.

If no deal is done by then, the country would soon be forced to default on its debt.

The first key date to come up following the eurozone talks is May 6, when about one billion euros is due for repayment to the IMF.

That is a small sum compared to the 9 billion due in July and August, this time to the ECB.

Nevertheless, Prime Minister Alexis Tsipras's government is putting on a brave front.

Finance Minister Yanis Varoufakis insists that "we are ready to make all kinds of compromises, even if we have to pay a political price, but we will not compromise ourselves".

"I am very confident," Varoufakis said.

"We will find a compromise," added Employment Minister Panos Skourletis.

But creditors are more pessimistic.

- Third bailout package? -

A German official said Monday that there was no progress in the talks that could unlock the funding.

The IMF's representative in Europe, Poul Thomsen also gave the same assessment, according to Greek television Antenna.

In Washington, IMF economist Olivier Blanchard said a "Greek crisis cannot be ruled out, an event that could unsettle financial markets."

Others were less alarmist.

Europe's Economy Commissioner Pierre Moscovici urged "a calm and serious approach" to Athens while Klaus Regling, head of the EU's bailout fund the European Stability Mechanism, called for patience in dealing with the new government.

Varoufakis will be attending an IMF meeting in Washington on Thursday, and also hopes to meet with President Barack Obama.

Guillaume Menuet, an economist at Citi, counts on the parties to find a deal.

"Neither Greece nor its main creditors want it to leave the eurozone. We believe that a deal would be found at the April 24 meeting," he said.

Nevertheless, any measures proposed by Tsipras's government would have to be cleared by parliament. When that could be is unclear.

These uncertainties are fuelling speculation that Greece may have to default at some point.

Athens has been busy beating off alarmist rumours swirling in foreign media in the past few days, saying that April 24 will be "another date when it will not be the end of the world".

In any case, Menuet said the Greeks would have to "begin considering a third bailout programme" worth between 25 and 50 billion euros in order to meet debt repayment obligations in coming months.

For now, Greek officials battling to put out the immediate fire are in no mood to discuss this, saying their current focus is the renegotiation of the country's outstanding debt.

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