Athens - A new proposal by Greek Prime Minister Alexis Tsipras drew a rare positive nod from European officials ahead of marathon talks on Monday, setting off a rally in Greek assets.
With time and money running out for a solution to avert a devastating default, the European Central Bank also approved additional emergency funding for Greek lenders which have been bleeding deposits at a record pace, according to a person familiar with the matter.
Speaking in Brussels, Tsipras said that now it’s time for a viable solution that will allow Greece to return to growth.
“We’re are coming to these discussions aiming to strike a financially sustainable agreement aiming to leave behind the exaggerated primary surpluses, to save pensions and wages,” Tsipras told reporters ahead of a meeting with Jean-Claude Juncker.
While the new offer “was a good basis for progress”, and a “step in the right direction”, according to European Economic Affairs Commissioner Pierre Moscovici, it was unclear that the plan presented by Greece would go far enough to end a months-long impasse and avert a Greek default at the end of the June.
“We have made progress over the last few days, but we are not yet there,” European Commission President Jean-Claude Juncker said. “I don’t know if we will have an agreement today,” Juncker told press conference with Tsipras in Brussels before Monday’s talks.
An International Monetary Fund official said that creditor institutions are still assessing Greece’s proposals and it’s too early to say whether they are sufficiently credible to break the deadlock. The official asked not to be named, as the person wasn’t authorised to speak publicly on the matter.
Greek bonds and shares rallied on Monday on confidence that a deal is within reach. The Athens Stock Exchange index rose 7.1 percent at 12.30pm local time, erasing most of last week’s losses, when it dropped 11.3 percent, the most since January. The yield on bonds maturing in 2017 dropped 4 percentage points to 24.75 percent while the 10-year bond yield dropped 145 basis points to 11.2 percent. Spanish and Italian government bonds also advanced and the Stoxx Europe 600 Index gained 1.8 percent.
Ahead of the summit in Brussels, Tsipras will sit down with Juncker before they’re joined by IMF Managing Director Christine Lagarde, European Central Bank Executive Board member Benoit Coeure and Eurogroup head Jeroen Dijsselbloem, an emailed statement from the Greek prime minister’s office said. ECB President Mario Draghi will also join the talks later, the statement said, while Tsipras will also meet with European Council President Donald Tusk before the summit starts.
Emergency funding
With the clock running down on a June 30 deadline to make payments and work out a new aid deal after months of fruitless negotiations, Tsipras will have to convince the country’s creditors that he’s ready to compromise on election promises and avoid a default. With its finances in tatters and bank deposits dropping at a dizzying pace, it’s unclear how long Greece can hold out without a fresh infusion of rescue loans.
The ECB’s Governing Council decided on Monday to raise the ceiling of maximum potential Emergency Liquidity Assistance available for Greek lenders, one person familiar with the matter said. The person, who asked not to be named as ELA decisions aren’t public, said the ECB will assess again emergency funding for Greece’s banks whenever necessary.
Euro-area finance ministers will meet at 12.30pm in Brussels to prepare the gathering of government leaders set to begin at 7pm
In phone calls on Sunday, Tsipras briefed German Chancellor Angela Merkel, French President Francois Hollande and Juncker on Greece’s proposal to unlock bailout funds, according to a separate statement from his office.
The new plan includes elimination of early retirement options as of next year, an increase on tax surcharges that middle- and high-income earners pay, as well as a levy on companies with annual net income of more than 500 000 euros, a Greek government official said Sunday. The official asked not to be named because the plans weren’t finalised and were subject to approval by the Greek cabinet that met on Sunday.
“So far the problem has been that the two sides have not been converging,” Athanasios Vamvakidis, head of G-10 foreign exchange strategy at Bank of America Merrill Lynch, said in a Bloomberg TV interview. “A success for today will be if they reach an understanding for what needs to be done for a deal. The next steps will be for the technical discussions to finalise all the details to make sure they add up.”
* With assistance from Nikos Chrysoloras and Marcus Bensasson in Athens, Ian Wishart in Brussels and Helene Fouquet in Paris
Bloomberg