Greece, creditors 'very close' to a deal: junior minister Euclid Tsakaloto

Wearing blue jeans, Greek minister of International Economic Relations Euclid Tsakalotos arrives for a cabinet meeting at the Prime minister's office in Athens on Sunday a day ahead a Eurogroup meeting. -- PHOTO: AFP 
Wearing blue jeans, Greek minister of International Economic Relations Euclid Tsakalotos arrives for a cabinet meeting at the Prime minister's office in Athens on Sunday a day ahead a Eurogroup meeting. -- PHOTO: AFP 

ATHENS (AFP) - Greece and its international creditors were "very close" to a loan deal for the cash-strapped country, a Greek junior minister said Sunday, a day ahead of a key meeting in Brussels.

"After weeks of painful negotiation, if the other side is willing, it will become apparent that... the deal is very close and will be sealed in the coming period," Euclid Tsakalotos, one of Greece's main negotiators, told Avgi daily.

Tsakalotos, a junior foreign minister, said Athens and its creditors were "politically apart" on labour and pension issues and that some areas "will remain open until the last minute".

At a meeting of eurozone finance ministers on Monday, Greece is hoping for a "positive statement" on negotiations that would allow for a portion of its 7.2 billion euros (S$10.72 billion) in remaining bailout loans to be released, officials have said.

European officials have, however, played down the likelihood of a deal being agreed on Monday.

"We have made progress, but we are not very close to an agreement," Eurogroup chair Jeroen Dijsselbloem told Italy's Corriere della Sera daily.

"It will surely not be reached at the Eurogroup meeting on Monday," he said.

Greece has been squeezing funds from the central and local governments to be able to meet its international loan payments. Without fresh bailout funds, Athens could face a default and messy exit from the euro within weeks, analysts say.

German Finance Minister Wolfgang Schaeuble, a leading critic of the new Greek government's policy plans, warned Sunday of the risk of sudden insolvency.

"Experience elsewhere in the world has shown that a country can suddenly slide into insolvency," he told the Frankfurter Allgemeine Sonntagszeitung.

He declined to answer whether Berlin was preparing for such a scenario, insisting instead that Germany "will do everything to keep Greece in the eurozone under responsible conditions." According to sources in Athens, a loan repayment of 750 million euros due on Tuesday to the IMF will be honoured on schedule.

Prime Minister Alexis Tsipras, elected in January on an anti-austerity agenda, has called for an "honourable compromise", and his government reportedly plans a number of concessions to win over the country's creditors.

According to To Vima weekly on Sunday, this includes a new unified VAT rate of 16 per cent for several goods and services currently taxed at 13 per cent.

The new VAT rate, along with an emergency tax contribution for the poor, a restriction on early retirement and an unpopular property tax will enable the government to raise an additional 5-6 billion euros, To Vima said.

The talks have been complicated by conflicting messages from Athens on budget targets and on how far the government is prepared to compromise.

A number of cabinet hardliners have urged Tsipras to resist "submission" to Greece's creditors.

The Wall Street Journal on Friday reported that Finance Minister Yanis Varoufakis had handed his counterparts a 36-page document forecasting 0.1 per cent growth this year, less than the 0.5 per cent predicted by the European Commission this week.

A day later, another finance ministry 'reform plan' emerged, 89 pages long and predicting a growth rate of at least 0.8 percent this year.

A poll in Real News daily on Sunday showed 71.9 per cent of Greeks favoured a compromise to keep the country in the eurozone.

And if the question was put to a referendum, as the government has indicated it may do, 49.2 per cent said they would accept further salary and pension cuts if it meant keeping the euro.