The long standoff between intransigent Greek socialists and their increasingly exasperated creditors appears to be reaching an end, judging by the commentary after an International Monetary Fund meeting this week. It appears as if the Greeks are running out of cards to play.
The IMF confab ended badly, with international negotiators complaining about a “lack of progress.” Greece promised on Friday that it would come up with new proposals this weekend, in advance of a meeting next week with finance ministers from across the Eurozone, which European Union president Donald Tusk said would be “really crucial and should be decisive.”
As the Associated Press reports, Greece’s largest creditor Germany is also sounding the sort of optimistic note that says there won’t be many more optimistic notes in the future. “Where there’s a will, there’s a way, but the will must come from everybody,” said German Chancellor Angela Merkel. The word “must” is probably supposed to be rendered in boldface, or perhaps letters of fire.
“Greece’s creditors – its fellow eurozone states, the European Central Bank and the IMF – want the country to commit to new economic reforms before they disburse the last 7.2 billion euros ($8.2 billion) left in Greece’s bailout fund,” explains the Associated Press. “The key points of contention appear to be cuts to Greek pensions, changes in the labor market and the size of Greece’s government budget.”
“Jeroen Dijsselbloem, the eurozone’s top official, said the onus was on the Greek government to come up with ‘sound’ proposals,” the AP adds. Until now, Greece’s ruling Syriza party has hoped to weaponize its debt, betting that the Europeans would fear the consequences of a default more than Greece will. However, there’s growing public sentiment in Europe, particularly in Germany, for booting Greece out of the Euro if they do not make the concessions desired by creditors.
The AP quotes David Mackie of JP Morgan predicting that Athens will finally blink: “We are coming to a head. Our judgment remains that Greece will offer concessions to get a deal.”
Exotix senior economist Jakob Christensen told CNBC that the IMF’s decision to pull its negotiators out of talks on Thursday “clearly sends a signal to the Greek government that the stakes are very high and there is very little room for more concessions from the IMF side.”
He judged that the IMF had given all ground that it can, “and now they’re not prepared to go any further.”
Although many reports, including CNBC’s, describe the collapse of this week’s talks with the IMF as a disaster and harbinger of fiscal doom, Greek officials sound quite sunny about the chances of reaching an agreement with the Eurozone ministers next week, with one official telling the Associated Press off the record that a deal is “closer than ever.”
If that deal does not materialize, the current $270 billion bailout package expires on June 30, and Greece will be unlikely to pay its next big debt installments to the IMF.