Greek deputy PM set for talks with ECB president

Greek deputy prime minister Yannis Dragasakis will meet European Central Bank president Mario Draghi in Frankfurt today as Greece ramps up its efforts to secure some relief from a looming funding crisis.

Talks on an interim deal between a reshuffled Greek negotiating team and representatives of the European Commission, the European Central Bank and the IMF have been under way since Thursday.

But, while officials on all sides have reported progress, six days of talks have yet to provide the breakthrough Greece needs to guarantee the flow of liquidity to its banks.

Deputy foreign minister Euclid Tsakalotos, who is co-ordinating Greece’s negotiations with its lenders, will also attend the meeting, which will take place in the evening, the official said.

The meeting comes as Greece’s talks with international creditors drag on and the European Commission prepares new forecasts that are expected to underscore the scale of the crisis facing the country’s government.

Cash squeeze

Wide differences over pension and labour reforms continue to dog the intensive negotiations despite progress in other areas as the country’s cash position becomes increasingly critical.

Government spokesman Gabriel Sakellaridis sounded the alarm on Monday, saying that while Athens intended to meet all its payment obligations, including the payment of nearly €1 billion to the IMF in May, it needed fresh funds before the end of the month.

“Liquidity is a pressing issue,“ Sakellaridis told a news conference. “The Greek government is not waiting until the end of May for a liquidity injection. It expects this liquidity to be offered to the Greek economy as soon as possible.“

Intensive talks on an interim deal between a reshuffled Greek negotiating team and representatives of the European Commission, the ECB and the IMF, renamed the “Brussels Group”, have been under way since last Thursday.

The aim had been to achieve a technical-level accord that would enable euro zone finance ministers to declare when they meet on May 11th that there is a prospect of concluding the bailout review successfully. But the two sides remain at loggerheads over several issues.

Greek labour minister Panos Skourletis said the International Monetary Fund, Greece's second biggest creditor after euro zone governments, was insisting on tough policy conditions for an interim deal to unlock frozen bailout aid.

The global lender was unyielding in demands for pensions cuts, rules to ease mass layoffs of private sector workers and opposition to a government plan to raise the minimum wage, Mr Skourletis told Mega TV.

“They are asking us to not touch anything [of the austerity measures] that have ruined Greek people‘s lives in the last five years,” he said.

The prolonged cash squeeze is threatening the country’s fragile recovery, with a person familiar with the talks saying that the Commission is likely to slash its growth and budget estimates when it releases new figures on Tuesday.

Fiscal noose

The fiscal noose is tightening after weeks of brinkmanship and prime minister

Alexis Tsipras

needs to show European officials that he’s willing to find a compromise if he’s to head off the risk of capital controls.

At the same time, the weakening economic outlook may give his negotiating team more leeway to argue that Greece can’t meet the budget targets demanded by its creditors.

“Greek economic conditions are deteriorating quite fast,” said Frederik Ducrozet, an economist at Crédit Agricole CIB in Paris. “It’s negative in terms of the fiscal revenues and the backdrop for the negotiations.

“But it also provides Greece with some bargaining power when they negotiate the primary surplus for this year and next.”

Finance minister Yanis Varoufakis will meet his French counterpart, Michel Sapin, in Paris this morning and EU economics commissioner Pierre Moscovici in the afternoon in Brussels. - (Reuters/Bloomberg)