Greek Bailout Talks Drag, Economic Performance Tops Expectations

Greek temple
Greece’s economic performance topped its creditors’ expectations but bailout talks still drag.

As bailout talks stall, Greece and its international creditors need to find a way to unlock a crucial financial aid before 6.3 billion of dollars in obligations come due this summer. The Union’s financial affairs chief Pierre Moscovici who arrived in Athens Wednesday will meet with the country’s Prime Minister Alexis Tsipras to find a common ground regarding the reforms Greece must do to stabilize its economy.

Europe wants a new deal by Feb. 20 ahead of a gathering of euro-area finance ministers in Brussels.

Moscovici told reporters after the meeting that the Greek government has the will to find a solution and when there is a will a solution is just around the corner. He voiced hope for the “best solution” to the debt crisis.

“[…] my feeling is, and always was, that we need a strong Greece at the heart of the euro-zone,”

the E.U. envoy said.

Greece’s creditors now want more budget cuts before they unlock the much-needed financial aid as some fiscal targets had been missed. The country’s bailout auditors – the Washington-based IMF, the European Central Bank, the European commission, and the European Stability Mechanism – seek fiscal cuts of 2% of the country’s GDP, a pension reform, and fewer tax exemptions, people familiar with the matter said. Greece will be able to lower some taxes only only if it has fiscal over-performance, sources also said.

Athens however denies the negotiations.

A spokesperson for the Greek government said that there was no such proposal. He told reporters that Tsipras was negotiating a deal that involved zero austerity measures. The spokesperson added that the economic growth is better than estimated and there is no need for more austerity measures.

Late last year, the country’s GDP slipped 0.4% after it had grown 0.9% in the prior quarter, an official report showed Tuesday. What’s more, the economy climbed 0.3% last year despite a prediction for a 0.3% contraction, which confirms a report from the European commission released Monday.

Furthermore, Greece beat all expectation when it comes to its 2016 fiscal target since it reached a budget surplus of 2.3% of the GDP. The original goal was just 0.5%. Commission analysts expect the surplus to hit 3.7% next year if the government unlocks the $91 billion bailout.

The country has beaten the IMF’s predictions that the surplus won’t be larger than 1.5% without cuts. As a result, the IMF and Germany said that they are willing to show a degree of flexibility in the negotiations they have not been willing to adopt to date.
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