Will there be a deal for Greece?

Hopes for a deal between Greece and its creditors rose this week after the International Monetary Fund (IMF) and European policymakers finally agreed on the exact terms they are going to offer the debt-laden nation. In the past few months, they have disagreed over several issues, notably the extent of reforms required to improve the Greek pensions regime and free up the labour market.

Greece’s prime minister, Alexis Tsipras, was expected to give his verdict on the offer by tomorrow. However, he was also touting Greece’s own plan this week, suggesting that discussions could drag on. On Wednesday, Greek stocks jumped by around 4% as traders looked forward to an end to the stand off.

What the commentators said

Chatter about Greece being on the brink of default “has become rather like the outrage over WPP boss Martin Sorrell’s pay”, said James Mackintosh in the Financial Times. “It comes around so often that investors tune it out”. But it surely won’t be long now.

Tomorrow, Greece is due to pay the IMF €306m. It needn’t actually pay the money today: it can roll the amount up with other payments, which total €1.6bn, and transfer all the money at the end of the month. But “Greece does not have the money”, and it’s hard to imagine where it might discover a “money tree”.

This stand off will, one way or another, be resolved in June, agreed The Economist. It’s not clear whether Greece can actually pay, but either way, the remaining €7.2bn in the bailout fund that Greece hopes to unlock will disappear if there is no deal by the end of the month, because an extension to the programme negotiated in February expires then.

The agreement between the creditors reportedly calls for Greece to reach a primary budget surplus (in other words, to be taking more money in taxes than it spends, excluding interest payments) of 1% of GDP this year, and 3.5% by 2018, noted Kerin Hope in the FT. That’s a lot more lenient than the targets in the current bailout plan, but still tougher than Athens had hoped for.

Greece may also baulk at pension reform. And even if there is a deal now, it won’t change the bigger picture – Greece needs a new overall rescue package if it is ever to get its debt under control, said The Economist. Hammering that particular deal out will constitute the next episode in this endless drama.

Merryn

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