Lagarde and Draghi fly to Berlin for late-night Greece talks

IMF managing director Christine Lagarde and ECB president Mario Draghi flew to Berlin last night for talks with the German and French leaders in a bid to strike an agreement on the stalled Greek bailout.

Four months after the Syriza-led government took power in Athens, the deadlock between Greece and its international creditors continued yesterday as technical talks between officials from both sides failed to yield a breakthrough.

While German chancellor Angela Merkel, French president Francois Hollande and European Commission president Jean-Claude Juncker had been scheduled to meet in Berlin yesterday evening, the decision by Ms Lagarde and the ECB chief to join the talks appeared to signal that some form of deal was in the offing.

Greece faces a €300 million repayment to the IMF on Friday, one of four repayments totalling €1.6 billion due to the Washington-based fund this month. Its interim bailout agreement, signed in February, expires at the end of this month, but the Greek government is struggling to meet regular pension and wage bills as well as repayments to international lenders.

Cash reserves

In a paper published yesterday Goldman Sachs warned Greece may default on some of its debt, or hold a referendum or fresh elections, in order to reach a deal. Noting that Greece’s cash reserves may be soon exhausted, Goldman’s chief European economist said a new government or a referendum may be needed in Greece given the distance between Greece and its lenders. The introduction of capital controls in the country is also a possibility, he said.

“Not only is it possible that we may need to see sovereign technical default and/or blocked Greek bank deposits in order to come to an accommodation between Greece and its official creditors, it may be necessary to do so in order to break the current impasse in negotiations.”

Large consensus

With discussions between officials from the Greek government and representatives of the trio of international lenders recommencing yesterday afternoon in Brussels, a European Commission spokeswoman said that officials representing the institutions were co-operating “very well” with the Greek authorities. “There is a large consensus about what needs to be done and where the talks should go,” she said, adding that there was no self-imposed deadline. “We are not in the business of setting deadlines, the only deadline is the end of June.”

Asked about Mr Tsipras's criticism of Europe's "absurd" demands on Greece in an opinion piece for French daily Le Monde, the spokeswoman said: "What matters more than op-eds are concrete reform proposals."

She told reporters in Brussels that discussions were continuing to reach a set of “credible reforms”.

"Progress has been made, but we are not yet there," she said. Discussions between Greek officials and representatives of the European Commission, European Central Bank and IMF are focusing on a number of key areas: pension reform, changes to the labour market, and VAT rates.