Can Greece and its lenders bridge their differences?

A deal between cash-strapped Greece and its international lenders over reforms is apparently “close,” but differences over the detail – and questions over whether they can be reconciled — remain.

Hopes of an agreement between Greece and the bodies overseeing its aid — the European Commission, European Central Bank (ECB) and International Monetary Fund (IMF) — were raised on Wednesday after the lenders appeared to be ready to compromise, offering Greece room for manoeuver on certain aspects of its bailout program.

As details of the proposals emerged on Wednesday, Greek Prime Minister Alexis Tsipras travelled to Brussels to meet with the Commission President, Jean-Claude Juncker, and discuss the ongoing impasse between the two sides over reforms and the future of Greece’s bailout.

After meeting with Juncker and the head of the Eurogroup of finance ministers, Jeroen Dijsselbloem, Tsipras said a deal was “close” and that the talks were “constructive.” But he insisted that Greece’s alternative proposals and ideas were the most viable.

“We exchanged views and, at the end of the day, the realistic proposals on the table are those of the Greek government. We have a basis to discuss them and this is the optimistic thing out of the discussions,” he said.

Common ground was found over lowering the primary budget surplus requirement for Greece, Tsipras said, but differences remained over some pension and taxation changes.

French Economy Minister, Emmanuel Macron, told CNBC in Paris Wednesday that Europe’s leaders were committed to “find(ing) a solution to keep Greece in the euro zone,” but that this required equal commitment from the Greek government.

“Mr Tsipras is completely aware of his chance and will have to take his responsibilities and propose some measures to meet his commitments,” Macron added.

And as momentum behind the negotiations appears to build, Dow Jones cited unnamed officials early Thursday as saying Tsipras was set to make a counter-offer to the lenders’ proposals.

‘Bridge the gap’

Following Wednesday’s meeting, Juncker said the “intense work” would continue — a sentiment echoed by Luxembourg’s Finance Minister.

“There is a last effort here to bridge the gap between Greek proposals and what euro zone members want, which is a global framework that is consistent with stability and growth,” Pierre Gramegna told CNBC Wednesday.

“This is the last effort and it seems the President of the Commission will try to find a solution with Mr Tsipras. I think it is key that a solution is found because we — Greece and the Eurogroup — have the same goal that Greece should stay in the euro zone,” he added.

European markets ticked lower as the Greek drama continued on Thursday, and Craig Erlam, a senior market analyst at foreign exchange firm OANDA, said in a note that focus was now on whether the gaps between lenders could be bridged.

“While both sides remain in disagreement over some key issues, progress does seem to be being made,” he said in a note, but added that as there was still some way to go he “refused” to get too optimistic.

“The messages coming from the talks are extremely mixed and even the creditors can’t agree on a consistent stance,” he said. “I guess we should be taking all comments with a pinch of salt at the moment and just recognize that this is an improvement on the rhetoric coming from both camps prior to a couple of weeks ago. That alone is reason for optimism.”

Deferring debt

Being flexible over reforms could be critical for Greece as it looks to avoid defaulting on its immediate and forthcoming debts to the IMF and ECB.

On Friday, Greece is due to pay the IMF 300 million euros ($335 million) — a payment that has looked increasingly unlikely as talks drag on, Greece’s money runs out and a final tranche of bailout aid remains out of reach.

A spokesman for Greece’s ruling Syriza party raised the possibility that Athens could defer the IMF debt.


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam
Craig Erlam

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