ATHENS – Tense talks between Greece and its international lenders went into limbo without an agreement on a number of reforms – especially how to deal with bad loans – leaving the government without a deal as Prime Minister Antonis Samaras’ coalition government heads for a vote of confidence it expects to win as it controls the Parliament.
Inspectors from the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) ended negotiations with a consensus only only a payment plan for people and businesses with debts to the state but not on how to deal with 80 billion euros ($100.8) billion in bad loans caused largely by the lenders’ demands on harsh austerity measures that created record unemployment and deep poverty.
The bulk of Greece’s 240 billion euros ($317 billion) in two rescue packages runs out this year, monies from the EU and ECB, while loans from the IMF were due to go on until 2016 but Samaras wants to end the memorandum by the end of the year to avoid the possibility of further pay cuts, tax hikes, slashed pensions and worker firings that have decimated support for his New Democracy Conservatives and coalition partner the PASOK Socialists.
The lack of progress means that a Greek delegation will head to Washington for talks with IMF chief Christine Lagarde on Oct. 12. She has been particularly hard on Greece, refusing to consider any chance of a debt write-down the government would like so as to walk away from a big chunk of what it owes.
That would push the burden of payment on taxpayers in the other 17 Eurozone countries, politically unpalatable for the leaders in those countries, particularly Germany where Chancellor Angela Merkel has also insisted on austerity as her country has put up the bulk of the loan monies and is profiting off them.
There were the outlines of an agreement on a new payment plan for individuals and businesses with debts to the state as talks concluded, but little sign of a deal on a range of other key issues, including the settlement of Non-Performing Loans (NPLs) that are crippling the ability of banks to lend out money.
Samaras and his Deputy Premier/Foreign Minister Evangelos Venizelos, the PASOK Socialist leader who was elevated after supporting public worker firings antithetical to his party’s founding principles, want Greek households to pay their debts but have so far exempted their own parties from paying 250 million euros ($316.6 million) they owe.
THINGS GET TOUGH FROM HERE
With the IMF being intransigent, Greece faces a tough time dealing with Lagarde. Finance Minister Gikas Hardouvelis, Bank of Greece Governor Yannis Stournaras – his predecessor – and Samaras’ adviser Stavros Papastavrou are due to go to Washington to meet her face-to-face.
The delegation will be given the task of trying to persuade her to agree on a formula to help conclude the review before the Troika returns to Athens again in early November, after the European Central Bank has conducted its stress tests and the new European Commission has been sworn in.
As the Troika talks went nowhere on the bad loans, the government was said to have shifted its attention to the problem of outstanding tax and social security debts and is expected to submit a draft bill in Parliament over the coming days with a plan to facilitate their repayment.
According to the blueprint, those with debts up to 15,000 euros will be allowed to repay them in up to 100 installments while those owing more than 15,000 euros will be permitted 72 installments.
There is a possibility of a solution being submitted to Parliament in a separate bill before early November when the Troika comes back, even if the lenders don’t like it.
A proposal by Development Minister Nikos Dendias to deal with the bad loans wasn’t accepted as he wanted to deal only with corporate loans and the Troika wants household debt repaid as well even if people can’t afford it. Dendias was said to have been irked at the rejection, defending what he called an “excellent piece of legislation.”
“We have made progress in the negotiations with the troika but we are not close to an agreement,” said a top Development Ministry official after the conclusion of the meeting with the Troika, the Athens News Agency (ANA) reported.
A Finance Ministry official noted that the negotiation was positive for the arrangement of the overdue debts, however some points may change.
ANA said the Troika asked for more details for the part of the arrangement on big debtors. The proposal was the 1,000 businesses with the higher debts should not be included in the arrangement in order to avoid a delay in the legislation.
A Finance ministry official said that the arrangements for major enterprises are more difficult because they must be on an individual basis while an arrangement for smaller businesses is easier because a ‘package solution’ may include them all, so it is possible that the criteria would become broader and the number of the small and medium sized enterprises that could be included in the arrangement would increase.
Development Ministry officials insist that there will be two legislations for the bad loans, one for the business loans and another for the households.
The meetings will continue in the following days and according to a top Finance Ministry official, the Troika doesn’t have to be in Athens to complete the negotiations although it wasn’t explained how that would be possible.
The Finance Ministry estimates that there are efforts so that the overdue debts issue is settled as soon as possible and there may even be changes in the arrangements regarding the number of the installments and the haircut on surcharges to social security funds and the Tax Bureau.
Finally, a Finance ministry official commented after the end of the meeting that “in today’s meeting we found out what the Troika is thinking while the main principles of the negotiation were discussed”.