Greece and its creditors have agreed on some aspects of a deal to unlock urgent bailout aid, but differences remain on its soaring debt and the amount of fiscal pain the country will have to swallow — suggesting hard political choices are imminent for both sides.
Greek Prime Minister Alexis Tsipras said Thursday that his government could endorse the budget targets sought by its main creditors — other eurozone countries and the International Monetary Fund — but not their methods for hitting those targets, which include demands for pension cuts and heavy sales-tax increases.
Still, in a sign that Greece now thinks a deal can be reached soon, the government decided on Thursday to bundle its loan repayments to the IMF this month into one payment. Athens had previously rejected this option, even though it relieves pressure on its cash flow, for fear of signaling that it had no money.
Read: Greece’s looming debt repayments in a pair of charts
The tough economic-policy terms demanded by Greece’s creditors pose a severe dilemma for Tsipras. He must steer between Greek voters’ wish to avoid default and stay in the euro, and his left-wing Syriza party’s opposition to further austerity measures, especially ones that hit its lower-income supporters.
After days of intense negotiations between Tsipras and European and IMF leaders, the focus of the drama could soon shift to Athens, where Tsipras risks a revolt by Syriza’s left-wing hard-liners if he tries to impose the lenders’ terms. The prime minister called a parliamentary session for Friday to brief lawmakers on the negotiations.
German Chancellor Angela Merkel, who has orchestrated a push in recent days to make Greece accept onerous economic overhauls in return for new financing, cautioned that much work remains to be done to reach a deal. “The talks are ongoing, potentially with great urgency. But they are still far from having reached a conclusion,” she said Thursday.
Merkel held a conference call with Tsipras and French President François Hollande later in the evening. “All sides showed willingness to find a solution,” a Greek official said.
IMF chief Christine Lagarde signaled Thursday that rendering Greece solvent would still require some form of debt relief from eurozone governments, meaning that tough bargaining would be needed between the fund and Europe, as well as between lenders and Athens. Still, some officials involved in the talks said the IMF had indicated to Europe this week that it wasn’t insisting on explicit promises of debt relief immediately, so as not to scuttle a deal on short-term financing.
An extended version of this story can be found at WSJ.com
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