Greece, creditors start fresh bailout talks

Greeks gathering at a National Bank branch in Athens yesterday. While the government has relaxed some curbs on deposit withdrawals and capital controls for corporations, Greek proposals for a lifting of limits on trading have been rejected by the ECB
Greeks gathering at a National Bank branch in Athens yesterday. While the government has relaxed some curbs on deposit withdrawals and capital controls for corporations, Greek proposals for a lifting of limits on trading have been rejected by the ECB, according to an Athens Exchange spokesman.PHOTO: REUTERS

Both sides want deal by Aug 20; new reforms likely to be in place by mid-month

BRUSSELS • The European Commission yesterday said talks between Greece and its creditor institutions on a third bailout had begun in Athens after a delay of a few days.

"Teams from the institutions are on the ground in Athens... Work has started, meaning the institutions are talking to the Greek authorities," a spokesman said.

The government of Prime Minister Alexis Tsipras has pushed two packages of measures through Parliament this month as conditions for starting negotiations on a three-year loan programme worth up to €86 billion (S$130 billion) to keep Greece in the euro zone.

Talks were to have started last week, but were delayed because of organisational issues.

Technical experts from the European Central Bank (ECB), the International Monetary Fund (IMF) and the European Commission will negotiate with Greece on reforms that need to be implemented in return for loans.

"Negotiations on a Memorandum of Understanding should now progress as swiftly as possible," commission spokesman Mina Andreeva said.

Both sides want a deal concluded before Aug 20.

Greece came close to the brink during a long stand-off between the government and its creditors, with Athens missing a debt repayment to the IMF and forced to close the country's banks for three weeks.

Voters angered by years of austerity demanded by the creditors rejected an earlier bailout offer in a referendum, but Mr Tsipras later agreed in Brussels to the lenders' terms as the crisis deepened.

Banks reopened with limited services last week, after Mr Tsipras capitulated to creditors' demands and agreed to implement prior actions required in exchange for the third bailout programme.

While the government eased some curbs on deposit withdrawals and capital controls for corporations last Friday, Greek proposals for a lifting of limits on trading were rejected by the ECB, according to an Athens Exchange spokesman.

Doubts persist about whether a severely weakened Greek economy can support another austerity programme after a six-year-long slump that has cut national output by a quarter and sent the unemployment rate over 25 per cent.

Among politically sensitive measures held back from the initial package were curbs on early retirement and changes in the taxation of farmers to close loopholes that are highly costly for the Greek state.

A source close to the talks said these reforms were expected to be enacted by mid-August.

EU officials played down the logistical and security issues that have dogged talks between the creditors and Greece since Mr Tsipras' radical government took office in January, promising to free Greeks from humiliation and imposed austerity.

ECB executive board member Benoit Coeure said in an interview published yesterday that the euro zone no longer questions whether to restructure Greece's debt but rather how best to go about it.

All euro zone countries wanted Greece to remain in the shared currency bloc and were prepared to offer "unprecedented financial solidarity" as long as Athens carried out reforms, Mr Coeure told the French daily Le Monde.

"In truth, the question is not whether to restructure Greece's debt but rather how to do it so that it would be really useful for the country's economy," he said.

The Bank of Greece, the Hellenic Capital Market Commission and the Finance Ministry are negotiating the ground rules for the reopening of stock markets, with temporary safeguards in place to preserve liquidity in the banking system, said the spokesman.

The chairman of the National Bank of Greece, Ms Louka Katseli, said in an interview with Agora newspaper that only the completion of an agreement for a new aid programme will restore confidence in the banking system and allow for the lifting of capital controls.

REUTERS, BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on July 28, 2015, with the headline 'Greece, creditors start fresh bailout talks'. Print Edition | Subscribe