Tsipras and Merkel to meet before summit to discuss standoff

Greek prime minister Alexis Tsipras is expected to discuss the escalating Greek standoff with German chancellor Angela Merkel tomorrow in Brussels, ahead of an EU summit, as EU officials played down the possibility of a new deal for Greece before the end of the month.

While finance ministers of euro member states are due to discuss Greece at an informal gathering in Riga on Friday, there is little prospect of a deal being finalised at the meeting, according to officials.

The euro weakened to a 12-year low against the dollar yesterday before recovering in late trading, as investors continued to price in the possibility of a Greek default. Two months after Greece signed an interim deal with the euro group, a fresh list of reform measures has not yet been agreed between Mr Tsipras’s government and its international creditors.

On Monday, the Greek government announced it would begin tapping the cash reserves of local authorities yesterday in a bid to bolster cashflow as the government struggles to meet regular exchequer costs. While local mayors reacted angrily to the decree, officials in Brussels said Greece’s lenders had been requesting the Greek government introduce such a system “for some weeks”, adding that the idea of using unused cash reserves for central government was a system used in many other countries.

Raiding

Greece has already been raiding other public-sector funds to meet its various domestic payment obligations, having been denied up to €7.2 billion of bailout cash due to it under its outstanding bailout programme. While the need to tap the cash reserves of local authorities highlighted the financial strains on the Greek government, reports emerged yesterday that the

European Central Bank

was considering ways of limiting its emergency funding of Greek banks, a provision that is keeping the Greek banks afloat. Although the ECB governing council has not formally discussed measures to curtail the emergency liquidity assistance it is providing to Greece, measures may be considered, Bloomberg reported.

Pipeline

Meanwhile, Mr Tsipras met with the head of Russia’s state-owned gas company,

Gazprom

, on Tuesday, amid signs a commitment to building a joint pipeline between the Black Sea and Greece may be in the offing. Following yesterday’s meeting, Greece’s energy minister said he hoped a deal on a pipeline would be reached “soon”.

The meeting takes place at a highly sensitive political moment in EU-Russian relations. The EU is today expected to launch a formal antitrust investigation into the activities of Gazprom, accusing it of abusing its dominant position in the natural-gas market. It follows almost three years of investigations by the European Commission, with the charges expected to focus on the issue of pricing.

Late last year Russia announced it was pulling out of the "South Stream" energy project with Europe. Russia supplies about a third of the EU's gas, with the Baltic States virtually 100 per cent dependent on Moscow for its gas supply.

The prospect of Greece failing to agree a revised reform package in the coming week risks jeopardising the February 20th agreement between Greece and its lenders, which set out the end of April as a deadline for “a successful conclusion of the review” ahead of a final deadline in June.

In Brussels yesterday, a senior EU official suggested creditors were moving away from imposing deadlines on Greece. “The use of deadlines, which leads to certain brinkmanship and unnecessary excitement, will not be done again,” he said, although it is possible that a further eurogroup could be called before the end of the month, ahead of the next scheduled meeting of euro zone finance ministers on May 11th, in Brussels.

“There is a clear pick up in activity, there is a clear pick up in engagement, but we are a significant way away from a signal that a result is in sight,” the official said yesterday.