- Title: EUROZONE-GREECE/GERMANY Optimism among analysts as deal on Greece seems closer
- Date: 10th July 2015
- Summary: COLOGNE, GERMANY (JULY 10, 2015) (REUTERS) EXTERIOR OF COLOGNE INSTITUTE FOR ECONOMIC RESEARCH SIGN READING (German): "COLOGNE INSTITUTE FOR ECONOMIC RESEARCH" VARIOUS OF HEAD OF COLOGNE INSTITUTE FOR ECONOMIC RESEARCH, MICHAEL HUETHER, AT INTERVIEW (SOUNDBITE) (English) HEAD OF COLOGNE INSTITUTE FOR ECONOMIC RESEARCH, MICHAEL HUETHER, SAYING: "The experience of the last f
- Embargoed: 25th July 2015 13:00
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- Location: Germany
- Country: Germany
- Topics: General
- Reuters ID: LVADXDXHEAYO84UFM76WUYADT1QE
- Aspect Ratio: 16:9
- Story Text: Analysts in Germany were cautious but optimistic on Friday (July 10) regarding a deal on Greece and the opening of negotiations on a third bailout programme.
The Greek government sent a package of reform proposals on Thursday (July 9) to its eurozone creditors to avert bankruptcy in which they asked for 53.5 billion euros ($60 billion) to help cover its debts until 2018, a review of primary surplus targets and "reprofiling" the country's long-term debt.
It is unclear whether all the creditors would back the latest reforms package, which was strikingly similar to the terms Greece had rejected in a referendum Tsipras had called in June.
The plan could cause trouble for Tsipras at home, from hard-liners in his own party as well as his junior coalition ally, and it will have to undergo a parliamentary vote.
Head of the Cologne Institute for Economic Research, Michael Hueter, said though he was skeptical about Greece's ability to enact all the reforms, the Greek government's public support made the situation easier.
"The experience of the last five years is not very favourable for the assumption that they will [be] successful in succeeding all these, solvings of problems they have, but I think it's the first time that they have a government in Greece who have a big support from the public, impressive support in the parliament, so they are able to solve these problems more creatively and more... Straight to the target rather than the previous governments," he told Reuters.
He added that he was optimistic that contagion in the eurozone could be avoided.
"I am very optimistic that we can avoid this because all the other crisis countries -- Portugal, Italy, Spain and Ireland -- had a very different situation and had a different experience from the last five years (of economic crisis). From the crisis management they were able to go ahead in the restructuring the economy and restructuring the public budgets. So we have a different situation than in spring 2010. There is an isolated problem of Greece and there is a more stable eurozone of the rest, so I am optimistic that we will be able to manage this problem," he added.
Finance ministers of the 19-nation euro area will meet on Saturday (July 11) to decide whether to recommend opening negotiations despite exasperation at the five-year-old Greek crisis. A senior EU official said the meeting would include discussions on whether Greece needs some debt relief.
The topic is one of the key issues to reach a deal, according Reuters Bureau Chief for Germany, Austria and Switzerland, Noah Barkin.
"Yes, well, one of the big stumbling blocks has been Greek demands for debt relief. They are supported by the International Monetary Fund (IMF) which says that Greece cannot return to sustainable debt levels without significant debt relief. What we'll probably see is instead of a sort of classic haircut, which means writing down the face value of the debt, the principle, we are going to see a stretching out of maturities of Greek debt if there is a deal," Barkin said.
"[W]hat Merkel has said and also her Finance Minister Wolfgang Schaeuble said that a haircut, which would in one fell swoop write down the value of European's loans to Greece, that would violate EU, the EU no-bailout clause. So they've said it's illegal to do that under EU treaties. But what they have said, what they have signalled, is that they could do some milder form of debt relief, which would involve stretching of maturities. That's something they already did in past years and they're likely to do it again if there, if there is a deal," he added.
Greek banks have been closed since June 29, when capital controls were imposed and cash withdrawals rationed after the collapse of previous bailout talks.
Greece defaulted on an IMF loan repayment the following day and now faces a critical July 20 bond redemption to the ECB of 3.49 billion euros, which it cannot make without aid.
The country has had two bailouts worth 240 billion euros from the eurozone and the IMF since 2010, but its economy has shrunk by a quarter and unemployment is more than 25 percent. - Copyright Holder: REUTERS
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