Home Fruitless Greece-Creditors Negotiation, Pause for IMF Convention

Fruitless Greece-Creditors Negotiation, Pause for IMF Convention

by John Kountouris
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–By Philip Chrysopoulos – Apr 12, 2016

Another long meeting between Greece and its international creditors ended early Tuesday without the two sides coming to a preliminary agreement on the bailout program.

Negotiations stopped because the mission chiefs of the European Commission, European Central Bank, European Stability Mechanism and International Monetary Fund left on Tuesday morning for the IMF spring meetings, April 15-17.

Coming out of the meeting at 2 am on Tuesday, Greek Finance Minister Euclid Tsakalotos said that talks will resume on April 18, after the IMF convention in Washington, DC. “Progress has been made on the issues needed in order to have a deal,” he said, expressing optimism that the two sides will have a staff level agreement deal before the meeting of euro zone finance ministers on April 22.

Greece was hoping to reach a preliminary agreement by Tuesday because time is running out on the disbursement of the next loan tranche. Athens will need 3.5 billion euros for debt repayments in July and it is very unlikely that it can meet its financial obligations unless it receives the next loan tranche.

The issues that remain pending are the threshold of tax exempt income, primary residence auctions, the selling of non performing loans to distress funds and supplementary pension cuts.

Creditors insist on tax exempt incomes to be below 8,182 euros, while Athens wants the threshold to be at 9,100 euros. The Greek side also wants to freeze primary residence auctions until end December 2016.
Also, the two sides disagree on the level of supplementary cuts, with lenders proposing cuts as deep as 40 percent. Also, Athens wants to put higher thresholds on the sale of bad business loans in order to protect small businesses.

Overall, creditors are seeking measures and reforms that would save 5.4 billion euros, or 3 percent of Greece’s gross domestic product.

European institutions and the IMF disagree on the primary surplus target for 2018. The European Commission believes that the proposed measures will achieve a 3.5 percent primary surplus in 2018. The IMF, on the other hand, believes that the measures will only bring a 1.5 percent primary surplus.

Another disagreement between Greece’s lenders is that the fund insists that debt relief is needed in order for the Greek debt to become sustainable. However, Europe, and especially Germany, do not want to discuss debt easing before the evaluation of the bailout program is completed and Greece implements necessary measures and reforms that would get its economy back on track.

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