Greece: Progress in bailout talks seen as one week remains
Spokesman for Greek president says progress made this week ahead of May 11 deadline

Observers from both the Greek government and its European creditors said over the weekend that progress has been made in bailout talks held over the weekend in Brussels.

"There has been a lot of progress, we are approaching an agreement," said a spokesman for Greek Prime Minister Alexis Tsipras at a press conference on Sunday.

Dutch Finance Minister and Eurogroup President Jeroen Dijsselbloem told the press that progress had been made, but it was too early to say whether talks with Greece had reached a turning point.

"They’re working hard now and that’s what we’ve gained,” Mr. Dijsselbloem said, speaking at the Hague on Friday.

But key differences reportedly remain to be resolved, particularly regarding cuts in pension funds and labor market liberalization.

The talks, which began Thursday, were the first to be led by economist and junior foreign minister Euclid Tsakalotos, who last week replaced the controversial Greek Finance Minister Yanis Varoufakis as head of Greece's team of negotiators.

Greece must make a €200 million ($272-million) payment to the International Monetary Fund on May 6 -- the government said it will be able to make the payment.

But it is not clear whether the Greek government will be able to make another payment to the IMF due on May 11 of €750 million ($839.2 million). The government is working to free up the next €7.2 billion ($7.8 billion) tranche of bailout payments in time to make the payment to the IMF.

Meanwhile, mayors of major Greek cities are holding back funds requisitioned by the government in an effort to meet all its needs.

Greece is expected to run out of funds to pay for its public services and to run its banks in the middle of May, according to credit rating agency Standard & Poor's.

Not reaching a deal with its Eurozone partners over reforms needed to receive its bailout could force Greece to default on its obligations to the IMF. This could lead to the end of the SYRIZA government, Zsolt Darvas, a research fellow at the Bruegel think tank in Brussels told The Anadolu Agency in an interview.

"There is a high probability that the Syriza government would collapse; there would be new elections (and) possible political paralysis. I think it’s very clear that Greece would lose more."

Around three-quarters of Greek public debt or around €270 billion ($302.7 billion) ( out of a total of €317 billion ($355.1 billion) is held by institutions — the European Financial Stability Facility, the European Central Bank as well as the IMF, according to IMF figures.

Should Greece fail to pay its debt, it could impose a direct cost on the Eurogroup, according to Fabian Zuleeg, chief economist at the European Policy Centre in Brussels.

"But I think the key fear (of) people is whether this would have a domino effect so, whether it starts in Greece, if you get a banking panic in places like Portugal, Spain and Ireland then this would clearly require further action," he told AA.

Many analysts fear a large-scale systemic shock in the case of a Greek default. As for a Greek exit from the euro, assuming such a thing were possible, "the global financial system would enter uncharted waters," according to European Central Bank governor Mario Draghi.

'Failed state' threat

According to a poll by German research group Sentix, global investors are losing confidence in efforts by the Eurogroup to keep Greece in the eurozone.

Sentix said last week that almost half of the 1,000-plus financial investors from 20 countries it polled in April said they expected Greece to leave the Eurozone within 12 months.

However, the most likely outcome of the negotiations is for Greece to stay in, according to Zuleeg.

He said: "In reality, I think a country like Greece leaving the eurozone would have problems finding money to pay its civil servants; it would have problems paying its soldiers and its police; it could not maintain the banking system.

"There is at least a credible probability that Greece becomes a failed state with a currency which no one in the world would want to hold."

Greece is currently being kept afloat through emergency funds provided by the European Central Bank.

Last Modified: 2015-05-04 19:17:38
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