Greece and Eurozone Send Positive Debt-Deal Signals

By LIZ ALDERMAN and JACK EWINGJUNE 3, 2015

The New York Times

ATHENS — As Prime Minister Alexis Tsipras of Greece visited Brussels on Wednesday to discuss a bailout deal, signs emerged that the two sides might be edging closer to a compromise.

Greece and its creditors understand the need for a quick solution to provide relief to the debt-burdened country and have agreed, at least in principle, to move toward a deal. The creditors even appeared ready to make a significant concession that would free up more money to flow to the Greek economy.

“It is a matter of a few days or even hours from a possible settlement,” President François Hollande of France told reporters on Wednesday at the Organization for Economic Cooperation and Development in Paris. Mr. Hollande had earlier spoken by telephone with Mr. Tsipras and Chancellor Angela Merkel of Germany in a conversation that Mr. Tsipras later called “constructive.”

On Wednesday morning, the European Central Bank president, Mario Draghi, said in Frankfurt that the central bank wanted Greece to “stay in the euro.” He called for a “strong agreement” that “creates growth and which is fiscally sustainable and addresses the remaining sources of financial instability.”

Mr. Tsipras met on Wednesday evening in Brussels with Jean-Claude Juncker, the president of the European Commission, and Jeroen Dijsselbloem, president of the Eurogroup of finance ministers, to discuss proposals to try to unlock 7.2 billion euros, or about $8.1 billion, from Greece’s existing international bailout program.

Mr. Dijsselbloem left the meeting looking stern, but he later described the meeting as “good.” The commission said in a statement that intense work would continue.

Mr. Tsipras told reporters that there had been progress on one sticking point, the so-called primary surplus, or the amount of revenue that Greece is required to hold in its coffers after expenses have been paid and before servicing its debt. But he said reaching an overall agreement would take more time.

Greece’s bailout program is set to expire at the end of the month, and creditors have been unwilling to release the funds unless Athens agrees to a set of revised economic policies meant to put it on a firmer financial footing in the future.

Greece and the creditors — the eurozone countries, the International Monetary Fund and the European Central Bank — have worked on dueling proposals this week to end the stalemate. It remains an open question whether they can bridge their differences and make a deal before the country runs out of money, perhaps within weeks, which could lead to its exit from the eurozone.

For months, Greece’s creditors have taken a hard line, insisting that the country stick to the program. Greece, in turn, has remained defiant, saying the imposed austerity measures are hurting its economy and people.

But beneath the customary tough talk, there was a softer subtext on Wednesday.

In one of the strongest signals of a potential compromise, Mr. Draghi said that “social fairness” — a new phrase from him — should be an element in the program that Greece will need to accept. And he indicated a willingness to slightly ease the fiscal targets that Greece has been asked to meet.

“The current downgraded growth perspectives of the Greek economy,” he said, “should be taken into account in determining what the appropriate budget surplus figures should be.” Translated, that means Greece should be given a little slack in its fiscal targets.

Mr. Tsipras said the discussions had taken place in a “friendly climate,” adding that all sides had agreed to avoid “the type of austerity measures of the past.”

The emerging area of compromise centers on the primary surplus. Mr. Tsipras has argued that Greece’s creditors have been forcing Athens to keep its primary surplus too high. Instead, he has said that much of that money should be made available to stimulate the economy, which has slumped back into a recession.

Under the current bailout terms, Greece is required to maintain a primary surplus of 3 percent of gross domestic product this year. Its government is pushing for less than 1 percent.

A compromise on that measure, if it comes, would represent a significant breakthrough in the talks. Although none of the parties cited specific numbers, Mr. Draghi indicated on Wednesday that a lower primary surplus target might be acceptable.

The European Commission, the executive arm of the European Union, has been a crucial broker between Greece and the eurozone countries to which it owes money. While Mr. Juncker was expected to spend considerable time on Wednesday night trying to persuade Mr. Tsipras to come to terms, the commission’s chief spokesman, Margaritis Schinas, cautioned, “This is a first discussion, not a concluding one.”

Mr. Tsipras still faces potential resistance to any debt deal from his own leftist Syriza party. A number of party officials have expressed exasperation over the perception that Mr. Tsipras may be softening his anti-austerity pledges to secure an agreement. Some Syriza lawmakers have hinted in recent days that they might break into open dissent if Mr. Tsipras strikes a deal that they consider unacceptable.

Nikos Filis, the spokesman for Syriza members of Parliament, said on Wednesday morning that Athens would not make a large loan payment to the International Monetary Fund on Friday unless a deal was reached.

“If there is no prospect of a deal by Friday or Monday — I don’t know by when exactly — we will not pay,” he said in an interview on Greek television.

The remarks may have been made mainly for a domestic audience. Earlier in the week, the finance minister, Yanis Varoufakis, said Greece would make good on the €300 million loan repayment due to the I.M.F. on Friday — although he, too, linked the promise of payment to reaching a debt deal.

But the statement underscored the fine line that Mr. Tsipras must walk between international compromise and his domestic obligations as he negotiates a final deal.

On Wednesday night, when asked whether Greece would be able make its next payment, Mr. Tsipras said, “Don’t worry about it.”

Mr. Hollande acknowledged in his remarks to reporters that austerity had pushed Greece’s already feeble economy to the brink. But he also indicated that creditors would not give Greece additional emergency funding unless Athens took concrete steps to overhaul the economy and mend its tattered finances.

“To demand too much from Greece will prevent the return of growth,” Mr. Hollande said. “But asking for nothing or not enough would have consequences for the whole eurozone.”

Liz Alderman reported from Athens and Jack Ewing from Frankfurt. James Kanter contributed reporting from Brussels and Niki Kitsantonis from Athens.