Optimism for New Greek bailout deal despite German misgivings

Athens, Greece (AFP) — Debt-ridden Greece and its creditors appeared on track Monday to finalise the terms of a third bailout agreement despite the misgivings of EU paymaster Germany.

Amid reports that a deal could be announced by Tuesday, Greek ministers took a break from talks with EU-IMF negotiators to brief Prime Minister Alexis Tsipras, the government said.

The talks between Greece’s finance and economy ministers, Euclid Tsakalotos and Giorgos Stathakis, and the European Central Bank, the International Monetary Fund and the European Stability Mechanism, aim to finalise the list of new reforms to be required of the Greek government in exchange for a lifeline of up to 86 billion euros ($94 billion).

Highlighting expectations, the Athens stock exchange on Monday jumped 2.06 percent, its third day of gains.

Greek financial websites report that the deal forecasts an economic contraction of up to 2.3 percent this year, and a balanced budget not counting interest repayments.

The new funds will enable Athens to avoid yet another loan default, as it faces an August 20 deadline to repay 3.4 billion euros to the ECB.

The ANA news agency said the negotiators hope to clinch an accord by Tuesday at the latest, while Stathakis has described the talks as being “in the final stretch”.

– ‘Thoroughness over speed’ –

But Germany may stand in the way of a full disbursement of the third bailout on top of two earlier rescue packages totalling 240 billion euros.

Appearing to throw cold water on the optimism voiced by the two sides, German government spokesman Steffen Seibert told reporters: “The principle ‘thoroughness over speed’ applies here in particular.”

Berlin favours a stopgap solution such as the short-term EU bridging loan of seven billion euros that enabled Greece to meet debt payments to the IMF and ECB in June and July.

German lawmaker Ralph Brinkhaus, a top official of Chancellor Angela Merkel’s CDU party, said earlier Monday that such a solution would be “better than a bad agreement”.

Sticking points include raising a solidarity tax on large incomes and VAT (sales) taxes on private studies, petrol for farmers and beef.

Another decision concerns whether to create a “bad bank” to dispose of some 90 billion euros in bad loans encumbering many Greek banks.

Any decision affecting farmers — an influential group in Greece — carries political risk and Tsipras last week promised to extract as many concessions as possible from the creditors.

On Monday, the prime minister pledged to cut lawmaker tax breaks and ministers’ salaries in a “symbolic” move to appease Greek society.

“When the issue of scrapping tax breaks for farmers falls on the negotiating table, we cannot pretend not to care about our own tax breaks,” Tsipras said.

Parliament may vote on the accord on Thursday, after which eurozone finance ministers could be asked to approve it on Friday.

– Snap elections? –

Tsipras meanwhile is under pressure from many in his radical left Syriza party who say the new accord will pile further austerity on a weakened economy and goes against the party’s campaign pledges.

But with his popularity among Greeks still high, Tsipras has warned the dissidents of early elections in the autumn if they continue to resist the measures.

Former energy minister Panagiotis Lafazanis, who is opposed to the new bailout agreement, has dismissed it as “a negotiating fiasco” and said Tsipras could not “avoid the outcry by resorting guiltily and hurriedly to elections”.

Iskra, a website of the Lafazanis-led Left Platform, the anti-euro group inside Syriza, on Saturday raised the prospect of snap elections as soon as the first half of September.

Quoting anonymous government sources, the website said the plan was to rush the bailout accord through parliament and then immediately call for snap elections in order to “purge” MPs who oppose the new deal.

However, the government spokeswoman insisted Monday that “there are no electoral thoughts.”

“The election talk cultivated in recent days is neither useful nor does it correspond to reality,” spokeswoman Olga Gerovasili said in a statement, adding that the government was focused on concluding a deal and then negotiating debt relief with its creditors.