Greece is heading into its latest last-chance meeting — you’d be forgiven for thinking you’ve heard that before.
The Eurogroup of finance ministers will meet on Saturday, following technical talks Friday. They’re trying to hammer out a deal that will give Greece its bailout cash, prevent it from defaulting, tumbling into capital controls, or out of the eurozone entirely.
Analysts at the world’s biggest investment banks are pretty much agreed that it really is the last time, this time.
- BNP Paribas calls it the “final bid to hammer out a deal.”
- Capital Economics says that it “looks pretty much like the last chance saloon,” doubling down by calling it a “final countdown.”
- Deutsche Bank also goes with “final countdown.”
- Oxford Economics says “Greece totters at the edge of a precipice.”
- Barclays goes for “last chance for Greece.”
- Bank of America Merrill Lynch says the situation is “on a knife edge.”
The other thing that they’re unified in is not having the remotest clue about whether a deal will be done over the weekend. Most say that their base case is that there’ll be a deal, but the confused reports coming out of Brussels and Athens don’t inspire a lot of confidence. In recent days there’s been a flurry of proposals and counter-proposals from Athens and the creditor institutions, but two things still stand out:
Firstly, there has genuinely been significant progress on a bunch of issues. A few months ago people might have thought that privatisation would be a major issue in the talks, but it hasn’t held things back too much.
Secondly, not much progress has been made in comparison on issues of fiscal austerity and pension reform. The government is still pushing for fewer cuts and changes to the pension system. The creditors want pensioners to make more contributions, work for longer and want special subsidies for low income pensioners (known as a solidarity grant) phased out entirely.
Similarly, tax is still a difficult issue. Greece wants a higher level of corporation tax levied against companies with profits above €500,000 ($US557,105 or £354,213). The concessions each side is willing to make on VAT still seem to be up in the air.
James Barty at Bank of America Merrill Lynch’s James Barty spells out the consequences of not getting an agreement:
If a deal cannot be reached over the weekend it is likely that at some point soon the ECB would have to stop ELA access for the Greek banks. That, in turn, might require banks to be closed and capital controls introduced.
Even there, analysts can’t agree. Even if the government does manage a deal, the governing Syriza party and Greek parliament need to sign on.
At the end June 30, two things happen.
Greece owes its €1.5 billion ($US1.67 billion, £1.06 billion) payment to the IMF, and its current bailout programme officially ends. Up until that point, the European Central Bank says it will keep providing emergency liquidity assistance to Greece’s commercial banks. After, it’s not so clear.
International Monetary Fund spokesman Gerry Rice says Greece will be “in arrears” if it doesn’t pay on June 30, but that doesn’t mean default. IMF chief Christine Lagarde dismissed the idea that there’s a “grace period” earlier this month.
Some analysts seem to think that Greece will be at immediate risk of default (and the ECB pulling the plug) as soon as July 1. Others think it won’t happen until July 20, the when the country’s next debt deadline comes.
It’s probably better not to imagine the situation as having strict deadlines, since the decisions are political and fluid. It’s a bit like a guitar string being constantly tightened — it’s very hard to say exactly when it will snap. But you know that it’s only a matter of time.