Bloomberg News - Greece to Meet With Creditors as Talks Stuck in Stalemate

French President Francois Hollande, left, and German Chancellor Angela Merkel last week set a target of reaching a deal by the end of May. Photographer: Tobias Schwarz/AFP/Getty Images

Greek officials plan to meet Wednesday in Brussels with creditors as time runs short to secure a deal before the country needs to make payments to the International Monetary Fund in early June.

There has been little convergence in recent talks to release bailout funds the country needs to pay the IMF almost 1.6 billion euros ($1.75 billion) next month, said people familiar with the matter, who asked not to be identified because the discussions are private. The first of the transfers is due June 5.

Greece’s standoff with lenders is likely to be a major topic on the sidelines of a Group of Seven gathering starting Wednesday evening in Dresden, Germany, for finance ministers and central bank governors. German Chancellor Angela Merkel and French President Francois Hollande last week set a target of reaching a deal by the end of May, a goal that Tsipras’s spokesman Gabriel Sakellaridis said Monday can be reached.

“Unfortunately, a lot of time has been lost,” European Central Bank Governing Council member Ardo Hansson said Tuesday in Tallinn, Estonia. “An agreement where underlying principles aren’t undermined would be in everyone’s interest, but so far it has been progressing very arduously.”

Greek shares rose Wednesday morning, with the benchmark Athens Stock Exchange gaining 0.7 percent at 10:45 a.m. local time. The gauge has fallen about 31 percent in the past 12 months, making it one of the worst performing major equity indexes tracked by Bloomberg. Yields on two-year notes rose for a second day, gaining 59 basis points to 25.49 percent.

G-7 Meeting

As the negotiations drag on, Greece has seen liquidity evaporate, pushing the economy back into recession. Record deposit withdrawals and the state’s increasing difficulty in meeting debt payments have renewed doubts about the country’s ability to stay in the euro. Key sticking points in the talks remain in areas such as budget targets, sales-tax rates, pension and labor market rules, Sakellaridis said.

U.S. Treasury Secretary Jacob J. Lew will urge his G-7 counterparts to find a constructive and pragmatic outcome in the Greece negotiations, a Treasury official said Tuesday. Failure to reach an agreement could create some unpredictable uncertainties for the European and global economies, said the official, who briefed reporters by phone on condition of not being further identified. A bad outcome in Greece could impact Europe and the rest of the world through many channels, he said.

ECB Call

The ECB is scheduled to hold a weekly conference call Wednesday to review the liquidity situation of Greek banks, as well as the discount it applies to the collateral the lenders pledge in exchange for emergency cash. The banks have lost access to capital markets, forcing them to rely on 80 billion euros of emergency assistance to stay afloat. The ECB can restrict those funds, if it judges that beneficiary lenders are not solvent or don’t have enough eligible collateral.

Even though no aid disbursements have been made to Greece since last summer, the country has managed to meet external payments by slowing down spending, building up arrears to suppliers and vendors, encouraging citizens to pay overdue taxes, and seizing the cash reserves of regional governments, hospitals, universities, and other public entities.

Greece expects to finalize a deal with creditors by June 5 -- when the first IMF payment is due -- and is discussing with them imposing a levy on bank transactions, Finance Minister Yanis Varoufakis told reporters in Athens on Tuesday. In a sign of the country’s efforts to find ways to boost income, Varoufakis said the government is also preparing legislation proposing a 15 percent tax to legalize undeclared deposits held in Switzerland and other jurisdictions.