Merkel, Hollande and Juncker to Meet in Berlin in Attempt to Save Greece

Bloomberg 

by Nikos Chrysoloras

Alessandro Speciale

Rebecca Christie

8:51 PM EEST

June 1, 2015

European leaders and the head of the International Monetary Fund gathered in Berlin to discuss plans to present Greece with what’s likely to be its only realistic chance of avoiding default and staying in the euro.

The top-level huddle includes German Chancellor Angela Merkel, IMF chief Christine Lagarde and European Central Bank President Mario Draghi, according to three people familiar with the plan. They asked not to be named because the talks are private. Two of the people said the goal was to hammer out an offer that Greece could consider in coming days.

Attempts at breaking the deadlock over Greek funding have taken on fresh urgency as the nation faces a debt repayment to the IMF on Friday. While Greece has said it can make the payment, it’s the smallest of four due to the Washington-based fund totaling almost 1.6 billion euros ($1.78 billion) this month, just as its bailout package from the euro region expires.

With discussions in their fifth month, deadlines have come and gone with meetings, calls and summits yielding little as disagreements over pensions and labor laws persisted.

French President Francois Hollande and European Commission President Jean-Claude Juncker were also said to be attending the Berlin discussions. Spokespeople for the ECB and European Commission declined to comment on the negotiations, while the IMF confirmed Lagarde was meeting with Merkel.

Technical negotiations on economic measures Greece must take were resuming and an agreement is closer, though not ready, a Greek government spokesman said on Monday. The aim is to release about 7 billion euros from its existing bailout before the debate begins over a new package.

Common Ground

Merkel was expected to be more involved as time runs out between this week and a meeting of euro-region finance ministers on June 18 in Luxembourg. According to an international official at the weekend, creditor institutions were working on a common proposal that would be presented to Greece in coming days.

The joint position may be communicated to Greek Prime Minister Alexis Tsipras by European political leaders, the person said, asking not to be named, as he wasn’t authorized to speak publicly on the matter.

Tsipras held a call with Merkel and Hollande on Sunday, with a German government official calling it “constructive.” At the same time, Greece and its creditors traded accusations for a lack of progress on talks at the weekend, a hallmark of recent months.

Tsipras wrote in French newspaper Le Monde that any intransigence wasn’t the fault of his four-month-old administration. He referred to “absurd proposals” being presented to his government by institutions.

Not Acceptable

A senior German lawmaker said on Monday it was down to Greece to adhere to reforms agreed to before Tsipras took power. Michael Fuchs, deputy parliamentary leader of Merkel’s Christian Democrat party, said Greece is to blame for the crisis and it’s “fully not acceptable” for the government to accuse the European Union. He spoke to Bloomberg Television.

Financial markets in Athens will reopen after shutting on Monday for the Orthodox Pentecost holiday.

The yield on Greek 10-year bonds rose to 11.49 percent in London, up from 11.25 percent on Friday. Last week, the yield moved between 10.95 percent and 11.98 percent as local reports of progress were followed by warnings from European officials that a default can’t be ruled out.

JPMorgan Chase & Co., which in April 2014 helped Greece return to international debt markets, recommended investors sell some longer-dated Greek government bonds. The U.S. bank said there was an increasing risk of capital controls.

After recommending buying Greece’s longer-dated bonds about the time Tsipras was elected in January, JPMorgan said investors should take 10 basis points of profit on a long position in the 3 percent Greek bond maturing in February 2042. A JPMorgan spokesman in London said the strategists are independent of the bankers involved in capital markets, who declined to comment.

“Although the central scenario is for Greece to reach a compromise before missed payments and/or capital controls, our conviction is not high enough to justify aggressive risk-taking,” Gianluca Salford and Aditya Chordia, rates strategists at JPMorgan in London, wrote in a note to clients.