Both sides are playing a risky game over Greece. Are we approaching the end?

The Greek negotiations have resembled Zeno’s dichotomy paradox, with the two sides halving the distance between each other but never meeting

 The Telegraph

By Ben Wright8:18PM BST 02 Apr 2015

Is this it? Are we reaching the event horizon beyond which the gravitational pull of Greece’s debts becomes so great that escape is rendered impossible?

Time and money are both dwindling. No one knows precisely when the Athenian coffers will contain nothing but moths and lint.

On Thursday, Greek government officials warned that the country could go bankrupt on April 9 when a €450m (£330m) loan from the International Monetary Fund (IMF) comes due for repayment. There are suggestions that Greece won’t pay. But this could be a feint.

April 20 is another date that is often mentioned. The cash-strapped government also faces €274m in interest payments on its government debt this month. The situation is further complicated by the number of Easter holidays in the coming days – Western this weekend and Orthodox next.

Trust, meanwhile, has long since run out. Yanis Varoufakis, Greece’s quixotic finance minister, has accused the Brussels Group (comprising the IMF, the European Central Bank and the European Commission, and formerly known as the troika) of leaking the country’s latest reform proposals.

Alexis Tsipras, the Greek prime minister, is packing his bags for a trip to Moscow, following hot on the heels of his energy minister. Overtures have also been made towards Beijing.

Domestically, things look increasingly bleak. Greece, which at one point looked like it was going to be the fastest growing European country this year, is weakening; tax receipts have collapsed. The government is already struggling to pay pensions, public sector salaries and other such sundries.

Meanwhile, €11.8bn was pulled out of banks in January and swiftly followed by another €7.2bn in February, rendering the country’s lenders increasingly dependent on emergency funding from the ECB. They may soon have to raise fresh capital to plug the widening holes in their balance sheets – if, that is, they can find amenable investors.

It certainly feels like we are entering the end-game.

But, equally, it’s felt like that before.

The markets appear to be inured to crisis and conditioned to expect resolution.

In March, 36.8pc of investors were predicting a country (Greece being the obvious candidate) might leave the euro within the next 12 months, according to a survey run by sentix. But that means almost two thirds of respondent don’t think there will be a break-up of the currency union within the next year. The figure actually fell from 38pc in February this year and is way down from the 73pc recorded in July 2012 when Grexit fears last peaked.

Sentix’s contagion risk index – which measures the expectation that a country leaving the euro will be followed by at least one other – is also falling.

This is matched by the record low spreads between the government bond yields of most peripheral European countries and Germany.

Gold – the financial equivalent of baked beans and bottled water – is trading at around $1,200 an ounce, way down from around $1,800 in 2012. No one has their tin hat on.

Are the markets overly-complacent about the risk of Grexit and then contagion? Maybe.

At times the Greek negotiations have resembled Zeno’s dichotomy paradox with the two sides halving the distance between each other but never meeting.

The creditor countries think that they have already demonstrated too much largesse; Greeks think that the 2010 bail-out benefited foreign investors while saddling their country with more loans when debt relief was required. The creditors can’t deliver an unconditional debt write-off; the Greek government can’t back down on its promise to end the bail-out. The tragedy is that both sides have a case.

But, although the bail-out programme can’t be abandoned, it can be amended. The previous Greek government received long-dated loans at low interest rates in return for fiscal promises and reform commitments.

It has not been unknown for the EU to turn a blind eye to missed fiscal targets and reforms are highly subjective. If there is wiggle room, this is where it lurks.

Of course, that is exactly why the eurozone countries have outsourced the negotiations to the Brussels Group. The independence of these institutions is supposed to ensure that the bail-out terms are sufficiently robust. In this regard the IMF, as the least European of the three, is key.

But, again, it’s possible to discern room for manoeuvre. The exact extent of the IMF’s independence is a keen debating point. It is based in Washington, a city in which eurozone treaties carry less weight than geopolitical concerns. Hence Tsipras’s cynical but finely judged Russian gambit.

Investors appear to be betting that these machinations will allow Athens to concede the bare minimum to unlock the next round of bail-out cash.

For its part, Greece is making concessions, albeit at a snail’s pace.

The Syriza government’s latest reform proposals could raise as much as €4.9bn of extra revenue this year – or 2.7pc of GDP. Growth and inflation expectations are more realistic.

On the downside, the draft contained little in the way of labour market and pension reforms – a key sticking point. The economic forecasts, while no longer fantastical, remain punchy.

Greeks traditionally play a game called tsougrisma at Easter with red-dyed eggs. The two players take turns hitting each other’s egg with their own. The winner is the person who cracks their opponent’s egg while keeping their own intact.

Greece and its creditors are playing a similar game. The public blows are almost certainly more ferocious than the gentler taps taking place behind closed doors. But there’s still a distinct possibility that a misjudged move could result in an unholy mess.

Optimists can, however, look to the history of the eurozone. If this tells us anything, it is that, faced with imminent disaster, the whole shambles will find a way to limp on a little longer.

The chances are that Greece will eventually produce a list of reforms that its creditors can pretend they are happy with. But that won’t provide a lasting solution to the country’s debt burden. And that, in turn, won’t fix the inherent design flaws in the eurozone.

The eggs will eventually crack. Just not yet.

ben.wright@telegraph.co.uk