Greece is at the top of the agenda for Friday’s Eurogroup meeting. Just a few weeks ago, this was considered the deadline for a deal, but now almost no-one expects that Greece will get a final bailout agreement at this summit.
The country’s new government is trying to unlock a €7.2 billion ($US7.8 billion, £5.2 billion) funding tranche to tide it over for a few months — without which it will almost certainly default at some point this year.
On his way in Eurogroup chief and Dutch finance minister Jeroen Dijsselbloem said “There is a great sense of urgency for all of us. Time is running out. But there is a great determination among our Greek colleagues.”.
There was some good news ahead of the meeting: Greek officials briefed the media to say there was some progress on agreeing a lower budget surplus target for Greece. But EU officials also told Reuters “that wide differences remain over reforms of the labour market, pension system, taxation and public finances.”
That makes it sound like they have agreed to the bit that the Greek government wants, but they’re having more trouble on the bit that it doesn’t. Those “wide differences” are on pretty much all the issues which are most important to access a deal.
Which might be a useful way to start negotiations, but it’s not clear that it constitutes massive progress.
There was some positive news on the cash front too — investment bank Credit Suisse expects Greece will make its May 12 payment to the International Monetary Fund, which HSBC had previously identified as a “crunch point”. Since then, the government has raided local municipal reserves and has bit more of a cash buffer.
Here’s Credit Suisse:
We expect the Greek government to make the IMF payment on 12 May. Recently announced measures — including a law decree to centralise the surpluses of some public sector entities (excluding pension funds), allow the government access to some additional liquidity — can act as a last funding bridge before a deal. But these also show us that the Greek government is really scraping the bottom of the financial barrel. Newspaper reports suggest that the measure will provide around €2bn of available cash lines. Government sources suggest that this should help Greece remain financially afloat until late May at least.
But that’s no real cause for celebration, as analysts at BNP Paribas note:
Whether or not Greece is able to fund its obligations in May and June it is clear that, however effective it is in accumulating all of the reserves of state entities, it won’t be in a position to cover its funding needs in July and August when Greek Government Bond (GGB) redemptions and coupon payments (on ECB-held GGBs) amount to around EUR 7.5bn.
It’s a salient reminder that even if today’s Eurogroup meeting goes well and Greece secures the bailout cash, we’re back in this situation (perhaps worse) in just a few months. Then, the Greek government says it won’t accept another bailout extension, and wants a full deal on debt.
Given the government’s sinking popularity scores, can it afford to give in next time?
BNP Paribas provided a useful time line showing just how many more payments come in June, July and August.