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Greek bonds are rallying after the country’s creditors in the EU and International Monetary Fund said bailout teams will return to Athens to continue talks amid escalating fears about the country’s €86bn rescue programme.

Hailing progress following today’s Eurogroup meeting in Brussels, Jeroen Dijsselbloem said bailout monitors would carry out technical talks in Athens to lay the groundwork for more ambitious talks to resolve differences between the EU and IMF over debt relief, budget targets and economic reforms attached to Greece’s €86bn bailout programme.

Greece’s left-wing Syriza government has in turn agreed to explore more pensions, labour market and tax reforms as the condition for monitors to return to the country. Further measures to reduce pension spending and increase tax revenues have long been demanded by the IMF if Greece is to hit its ambitious budget targets.

“There is no political agreement at this point. That is too early”, said Mr Dijsselbloem, head of the Eurogroup, following a short meeting of ministers and IMF officials on Monday.

Despite being hailed as the last major meeting on Greece before a roster of key eurozone elections over the next seven months, hopes of a breakthrough to provide Athens with fresh injection of bailout cash or finally resolve differences with the IMF had dissipated ahead of today’s talks.

Mr Dijsselbloem insisted that the need for an immediate agreement was not pressing as Greece did not face any short-term cash flow problems until a major debt repayment bill falls in July. “There is no need for a disbursement in March, April or May”, he said.

However, creditors remained ready to resume talks over the country’s second bailout review to help boost Greece’s fragile economic recovery. Talks over Greece’s economic measures would “shift” from austerity towards structural reforms, added Mr Dijsselbloem but provided no details on what measures Athens would be asked to put before its parliament. They are expected to include a change to lower the threshold for income tax and a revamp of labour laws to make it easier to hire and fire people.

“If we want economic growth to continue and pick up then confidence is the key factor”, said the Dutch finance minister.

Ahead of the meeting, the EU and the IMF had been at loggerheads over their diverging outlooks for the Greek economy. The Fund has so far stood on the sidelines of the bailout, providing no financial support until it has greater assurances Greece can hit targets such as a 3.5 per cent primary surplus and substantially reduce its debt load.

A spokesman for the IMF welcomed the return of bailout monitors to the country but said “more progress will be needed to bridge differences on other important issues, and it is too early to speculate about the prospect for reaching staff level agreement during this mission.”

Greece’s two year bond yield maturing in April 2019 fell 60 basis points to 8.7 per cent on the news (yields rise when a bond’s price falls).

The yield on the short-term Greek bond, which had come to reflect nerves over a potential setback in bailout talks, had risen to an eight-month high of near 10 per cent earlier this month following a public spat between the EU and IMF over the budgetary measures and debt relief attached to the bailout programme.

Today’s Eurogroup meeting was the last before an election season starting with the Netherlands early next month and ending with Germany in September.

Speaking ahead of the meeting, Slovakia’s hawkish finance minister Peter Kazimir said Greek talks were “a topic you want to avoid in [electoral] campaigning”, adding that his government was not willing to pay “any price” to keep the IMF financial involved in Greece.

Copyright The Financial Times Limited 2017. All rights reserved.
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