ATHENS — Greece’s cash-strapped government insisted May 27 it was “very close” to reaching a vital deal with bailout lenders, but the optimism in Athens was swiftly shot down by German Finance Minister Wolfgang Schaeuble.
Greece’s four-month-old government is days away from loan repayments to the International Monetary Fund it says it may not be able to honor.
Prime Minister Alexis Tsipras paid a rare visit to the Finance Ministry to announce that a breakthrough was in sight. “We have taken very many steps. We are in the home stretch, close to the final agreement,” he told reporters.
The news buoyed markets, with the main Athens stock index closing up 3.6 percent, and other European markets also posting gains.
Giorgos Stathakis, Tsipras’ Economy Minister, insisted a compromise could be reached as soon as this weekend.
“The deal is very close,” he told private Mega television, adding that Greece would maintain emergency taxes and agree to simplify sale-tax rates to raise additional annual revenue worth nearly 1 billion euros ($1.1 billion).
Lenders, he said, had made concessions on axing labor rights and pension reforms.
In the German city of Dresden, where finance ministers of the Group of Seven economic powers were preparing to meet, Schaeuble said he did not share Athens’ view.
“We’ve been hearing a lot of positive news from Greece — and that’s good — but in essence, the negotiations have not progressed much,” he told Germany’s ARD television.
Since the start of Greece’s bailout program in 2010, IMF and Eurozone creditors have been releasing rescue loans on condition the country implements strict austerity measures.
Tsipras’ radical left-led government, which has promised to end austerity, needs a deal for the latest installment by June 5, when it has to repay some 300 billion euros to the IMF.
Failure to make the repayment could put Greece on a slippery slope, forcing it to impose limits on money withdrawals to avoid a bank run, and threatening its Eurozone membership.
Earlier on May 27, U.S. Treasury Secretary Jack Lew spoke to Tsipras on the phone. A Treasury Department statement said Lew “reiterated that failure to agree on a path forward would create immediate hardship for Greece and broad uncertainties for Europe and the global economy.”
Before heading to Dresden, Lew spoke at the London School of Economics, and warned of the potential risks globally of a Greek impasse.
“It’s a mistake to think that a failure has no consequences outside of Greece,” he said. “We don’t know the exact scope.”
By Nicholas Paphitis and Derek Gatopoulos. Elena Becatoros in Athens, Carlo Piovano in London and Raf Casert in Brussels contributed
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