Pressure on Greece eases after debt partners meet

Pressure on Greek debt eased on Friday as European negotiators tried to bridge differences over Athens’ bailout programme that have sent tremors through global financial markets.

Talks in Brussels involving the EU, the International Monetary Fund and Greek officials followed a turbulent week for the bailout, with a European backlash after warnings from the IMF that Greece faced an explosive surge in its public debt.

Greece and creditors are grappling over how to keep Athens on track to make a €7bn debt repayment in July, which it will not be able to do without the release of further bailout aid from its programme.

Markets were hit this week on concerns that, with several key elections in Europe this year, a deal might not be reached before July.

Officials said that Friday’s meeting, which included Greek finance minister Euclid Tsakalotos and Jeroen Dijsselbloem, president of the eurogroup of finance ministers, was a sign of how the euro area was striving to make a breakthrough on the programme this month.

According to people briefed on the talks, IMF and EU officials discussed options with Greece for how and when the country would enact steps to cut pension costs and widen the tax base.

The talks should not be dramatised . . . The most important thing is that we are sitting at the same table to discuss the positions of Greece and the creditors

On Friday, yields on Greek two-year bonds fell back from an eight-month high, falling from close to 10 per cent on Thursday to 8.4 per cent on Friday, amid hopes of a breakthrough.

A senior EU official said that a priority in the talks was to solve a longstanding row between the IMF and Athens over calls from the fund for Greece’s parliament to “pre-legislate” belt-tightening measures — that is, to adopt measures now that would kick in later if the country were to slip in meeting key fiscal targets.

One official said that the goal was to find “common ground on budget issues and labour market reforms” in Greece so that teams of IMF and EU officials could head to Athens and finalise a policy review of the bailout programme that has dragged on since last year.

Mr Dijsselbloem said after Friday’s talks: “There is a clear understanding that a timely finalisation of the second review is in everybody’s interest.

“We made substantial progress today and are close to common ground for the mission to return to Athens the coming week.”

Up until now, Greece has staunchly resisted the request from the IMF to pre-legislate post 2018 policy reforms, with Mr Tsakalotos saying last month that the idea “goes well beyond the framework of democracy and the ethical values that inspired Europe”.

Alexis Tsipras, Greece’s prime minister, has gone further and said that the country would not enact “one euro more” of budget savings than those already agreed with its creditors.

Euro area finance ministers will meet in Brussels on February 20 in their last scheduled gathering before the Netherlands goes to the polls.

Traders fear that the programme could become stalled amid disagreements between the euro area and IMF, which has yet to fully join the bailout.

The fund has clashed with Berlin and other euro area capitals over its calls for more debt relief for Greece and a lowering of the country’s primary surplus targets. However, the fund’s participation is seen as essential to maintain parliamentary support for the bailout in some capitals.