The deadline for a deal to resolve Greece’s ongoing drama seemed to be pushed back last week. But new stresses could appear as early as this week if there’s no noticeable progress on the talks.
Last week Greece decided to “bundle” the four International Monetary Fund (IMF) debt payments it owed in June — worth about €1.5 billion ($US1.66 billion, £1.09 billion) collectively — into one, which will be due at the end of the month.
That kicked the payment that was owed on June 5 three weeks into the future, and meant Athens could wait longer for a bailout deal. But at least according to some analysts, that will be little to no relief in the tense talks.
Much of the timeline actually remains the same, as Bank of America Merrill Lynch researchers pointed out in a note titled “Brinkmanship in Greece: fasten your seatbelts” on Monday morning.
Previously, the hard deadline for approval of both Greek and other European parliaments was the end of June — and that’s still true now.
Here’s BAML FX strategist Athanasios Vamvakidis:
Greece and its creditors will have to finalise the deal by the end of this week, the Greek parliament will have to approve the deal the following week, and the European parliaments will have to approve it during the last week of June (assuming away problems with the summer recess). Such a deal will have to include at least €5bn to repay the IMF by June 30 and the ECB bonds that mature on July 20 — to cover all IMF and ECB payments during the summer, Greece needs about €10bn.
When it’s put like that, the three weeks left don’t seem like such a long time. Last week’s dramatics suggest that the two sides are still far from a deal, with each presenting proposals and counter-proposals that disregard the other’s red lines.
At the end of last week Prime Minister Alexis Tsipras was referring to the creditors’ suggestions as illogical and absurd. Meanwhile over the weekend EU Commission President Jean-Claude Juncker has attacked Tsipras for distorting the discussions that took place last week. Juncker is generally perceived as one of Tsipras’ few potential allies, or at least one of participants most likely to be flexible to keep Greece in the eurozone.
BAML’s Vamvakidis adds that because positive developments need to start soon for the June 30 deadline to be reached, “we may see negative scenarios unfolding even before June 30.”
Barclays analysts also lay out the potential for political crisis in a note:
In our view, this reflects mounting divergence within the Syriza party, especially about the government’s acceptance of more fiscal measures and pension cuts in order to reach a deal. We think compromise on these thorny issues by the Greek government will be costly politically. It could trigger a political crisis that would accelerate deposit outflows and result in the imposition of capital controls on Greek banks.
So the new June 30 deadline doesn’t actually give the negotiators much more room to breathe, and the inevitable crunch — whether financial or political — is looming.