A Greek national flag flutters on Acropolis Hill in Athens on Sunday, May 3. In order to avoid a default, Prime Minister Alexis Tsipras may need to show the European Central Bank in the coming days that he’s willing to work towards a compromise.Kostas Tsironis/Bloomberg
Greece and its international creditors are still far apart on key elements of the country's bailout agenda after four days of intensive negotiations.
Differences remain on issues ranging from fiscal assumptions to asset sales and labour and pension reforms, according to three people familiar with the negotiations. Still, progress has been made in a much-improved atmosphere, they said. Another official said that Greece should have enough cash to get through the week and make a €200-million ($272-million) payment to the International Monetary Fund on May 6. The people spoke on condition of anonymity as the talks are confidential. Negotiations resume Monday.
The fiscal noose is tightening on Greece after weeks of brinkmanship and Prime Minister Alexis Tsipras may need to show the European Central Bank in the coming days that he's willing to work towards a compromise. Failure to do so could prompt the ECB to tighten conditions on emergency lending at a meeting on May 6, a decision that would risk pushing Greece further toward default.
Euro zone officials are skeptical that a technical agreement will be reached by May 6, said two people familiar with the talks.
Mr. Tsipras held talks on Sunday evening with Finance Minister Yanis Varoufakis and the head of his government's negotiating team, Euclid Tsakalotos, to discuss progress in the negotiations. Mr. Tsipras has said he aims for enough progress this week to allow the ECB to relax liquidity conditions and avert a default that could come as soon as this month, Greek newspaper Kathimerini reported on Sunday.
"It's clear that we need an interim agreement as soon as possible to unclog the situation," Greek government spokesman Gabriel Sakellaridis said on Saturday. "The continuation of this uncertainty benefits neither Greece nor Europe."
On May 6, the ECB's Governing Council is due to discuss whether to increase discounts on the collateral it accepts from Greek banks in return for emergency funding, a move that could further restrict access to liquidity. Greece is faced with a second payment to the IMF of €770-million on May 12.
The stance of the governing council will depend on the progress achieved in the talks in the meantime, one of the people said, adding that restrictions on Greek banks can only be eased once it's absolutely clear that bailout funding will resume.
Mr. Tsipras told his cabinet on Thursday he is confident of closing a deal ahead of a meeting of euro zone finance ministers on May 11, even as his government sent conflicting signals on its willingness to agree on reforms required under the €240-billion bailout.
Investor optimism that a deal to unlock financial aid for Greece is close after months of talks put the country's assets among the region's best performers in April. The Athens Stock Exchange Index of shares jumped the most by the end of April since September 2012 from a two-year low on April 21. It ended up 6.1 per cent in April, the biggest rally in western Europe. Bonds returned 13 per cent, as securities across the region fell.
Nevertheless, there are signs of dissent within Mr. Tsipras's government with some government officials, including Varoufakis, stressing their opposition to pension cuts or a sales tax increase. Officials earlier had expressed hopes that a preliminary agreement could have been reached by Sunday.
While the government is working hard to get a deal as soon as possible, it will draw the line on matters such as labour market reforms and cuts to wages and pensions, Mr. Sakellaridis said.
Despite progress on the process, there is still a long way to go on the substance of the reforms needed to reach an agreement, another person familiar with the talks said earlier.
The official said that the Greek government's economic assumptions are optimistic, making it difficult to agree on the extent of fiscal adjustment measures the country must adopt to meet goals under its bailout.
Those assumptions for deficit, debt and revenue are based on a growth forecast of 1.4 per cent for 2015. The European Commission is expected to lower its current forecast of 2.5 per cent to well below the Greek government's estimate when it issues its spring forecasts on May 5, the official said.
Dutch Finance Minister and Eurogroup President Jeroen Dijsselbloem said it was too early to say whether talks with Greece had reached a turning point.
"They're working hard now and that's what we've gained," Mr. Dijsselbloem told reporters in the Hague on Friday. "But in the end we only look at the results and we're not that far yet."