(MENAFN- Gulf Times) European officials and Greek authorities are set to begin talks intended to pave the way for aid payments needed to avert default, as yields on the country's 10-year notes rose to their highest level in a month.
Representatives of the European Central Bank, the European Commission, the European Stability Mechanism and International Monetary Fund were meeting in Brussels yesterday with Greek executives, according to a Greek government official.
Technical discussions will start in Athens a day later, said two officials representing the so-called troika of international institutions, asking not to be named in line with policy.
Only low-ranking technocrats from the institutions will be allowed to Greece's capital for targeted data collection and won't meet ministers, according to the Greek official. Visits to Athens will have to be agreed by the Greek side, the official said in an e-mail to reporters, asking not to be named in line with policy.
"Our joint aim is to make these talks succeed," EU Commission spokeswoman Mina Andreeva told reporters in Brussels, saying that no details were available on the Athens element of the talks. "We should let the experts do their work calmly in order to arrive at a successful conclusion of the talks."
Without access to capital markets, Greece's only sources of financing are emergency loans from the euro area's crisis fund and the IMF. Its banks are being kept afloat by an Emergency Liquidity Assistance lifeline, subject to approval by the ECB. Failure to unlock bailout funds will lead to the country running out of cash within weeks.
The deadlock sent Greek government bonds lower, with three-year yields rising 190 basis points, or 1.9 percentage points, to 18.33% at 12:33pm London time. The 10-year rate climbed 34 basis points to 10.72%, the highest since February 10. Stocks fell 0.7%.
Greece sold ‚¬1.3bn ($1.4bn) in 13-week treasury bills yesterday, with a uniform yield of 2.7%, the highest in a year.
As in every auction since a January 25 ballot catapulted the anti-austerity Syriza party to power, the coverage ratio was 1.3, matching the exact amount needed to absorb non-competitive bids on top of the auctioned amount.
The proceeds will be topped up with another ‚¬300mn of second day bids yesterday, and used to roll over a ‚¬1.6bn treasury bill redemption of the exact amount.
Greece's government also needs to repay about ‚¬352mn to the IMF tomorrow.
"People are worried that Greece is running out of cash," said Daniel Lenz, lead market strategist at DZ Bank in Frankfurt. "So far there are no intentions of the Eurogroup to transfer money without Greece delivering some of the requirements," he said, referring to euro-area finance ministers. "Greece itself is obviously lagging very much behind delivering the requested details on reforms. GGB rates may even head to new highs in the coming days on a further level of escalation we are seeing."
As bailout disbursements have ceased, the Greek state covers its cash deficit by rolling over treasury bills, forcing the country's banks to make a choice between participating in liquidity-draining auctions or letting their sovereign default.
The ability of Greek banks to buy the sovereign's short- term notes is constrained by a deposits outflow and the ECB's refusal to allow greater exposure of Greek lenders to their sovereign.
"The auction result was OK" Thanassis Drogossis, head of Equities at Athens-based Pantelakis Securities, said in an e-mail. "Liquidity is very tight, but thankfully another box was ticked in the race against time."
The ECB will hold an extraordinary review of the ELA extended to Greek lenders this week, according to two officials familiar with the matter, as the Frankfurt-based institution is raising the pressure on Athens to meet its bailout commitments.
Last week, the ECB's Governing Council decided to hold a weekly review of the liquidity needs of Greek banks, instead of the regular biweekly process and to monitor ELA provision for Greece more closely, one of the officials said.
"It seems to me the time for the new Greek government to play games, maybe with a genuine hope and will to change the policy framework of Europe, is coming to an end," Mario Monti, the economist who served as prime minister of Italy during the country's financial crisis, told Bloomberg TV yesterday.
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