Alexis Tsipras, the Greek Prime Minister, insists he is close to a deal with the country's creditors that would result in the remainder of the bailout loan funds to be dispersed helping to ease the country's cash shortage.
This is not the first time Greek officials have said they are close to a deal. The same claim was made back on May 8. There are still key issues that are not resolved including pension and wage reforms, that is austerity measures. Tsipras claims that there is no possibility of retreat either on the wages issue or pensions. However, Greece has already caved on the issue of privatizations and tax reform another two issues that were previously said to be red lines. If there is to be a deal Tsipras would probably be required to yield on the pensions and wage issues as well. There will be virtually nothing left of the government's anti-austerity measures. Both the IMF and other EU creditors insist that the Greek reform proposals are still too vague. An EU official said that the Greek government needed to move beyong promising openings to final agreed upon wording and commitments.EU leaders are holding a conference in Riga, Latvia, on May 21 and 22 to discuss eastern Europe. Tsipras will raise the bailout negotiations issue on the sidelines of that conference. The negotiations are now stretching beyond 100 days with little progress made until lately when Greece caved on key issues of taxation and privatization. Stephen Gallo, European head of currency strategy at the Bank of Montreal said in a TV interview: “Even if they have a deal before the bailout extension ends at the end of June, we don’t think they’ll get access to the full remaining 7.2 billion euros ($8.2 billion) of the current bailout extension.” He said the Greek crisis will not be over for a long time.Meanwhile the Greek financial situation is getting worse as the government scrambles to raise 500 million euros in cash to pay for wages and pensions at the middle of the month. After raiding pension funds, and local governments the government is now asking that consulates and embassies cough up any cash reserves. The credit rating of government debt has plunged further into junk status. Greek banks have seen huge withdrawals of funds as nervous depositors worry that there may be a default and a return to the drachma. Money is flowing out of Greece as well. A leaked IMF document notes:
“non-performing loans are at very high levels and – going forward – the system might suffer from important stress. The staff also noted a dramatic deterioration in the payment culture in the country”. This last refers to the near gridlock of the Greek system of inter-company payments as betwen €30 and €35bn has flowed out of the banking system – into the cash economy and abroad – since Syriza came to power.