(MENAFN- Gulf Times) Greece will likely miss a deadline for a deal with creditors by the end of the week as the two sides make little progress in their talks, four international officials familiar with the matter said.
Greece is nowhere close to an agreement with the European Commission and International Monetary Fund, missing a target for a deal by the end of May set last week by German Chancellor Angela Merkel and French President Francois Hollande, said the people, who asked not to be identified discussing private negotiations. Underscoring how far apart they remain, creditors don't believe the Greek budget numbers add up, two people said.
Greek Finance Minister Yanis Varoufakis said on Tuesday that he's now aiming for a deal by June 5, when the first of almost ‚¬1.6bn in IMF payments due next month must be made. US Treasury Secretary Jacob J Lew, who spoke yesterday with Prime Minister Alexis Tsipras for the second time in less than a week, said he'll push for movement in the standoff at a Group of Seven gathering for finance ministers and central bank governors in Germany.
"It's time for everyone to park the rhetoric on the side and look for that sensible place where accommodation can be found," Lew said at an event in London. "No doubt the worst and deepest consequence would be to Greece. But it's profoundly in the interest of the European and global economy for the accident to be avoided."
The European Central Bank yesterday left the level of emergency cash available to Greek banks unchanged from a week ago at ‚¬80.2bn ($87.6bn), said two people familiar with the matter. Greek lenders still have a liquidity buffer of about ‚¬3bn, one of the people said.
The Bank of Greece didn't ask for added funding because deposit outflows have stabilized, a Greek government official said. ECB and Bank of Greece spokesmen declined to comment. The lenders are reliant on the emergency assistance to stay afloat because they've lost access to capital markets and the ECB's regular financing operations.
Greek shares rose yesterday, with the benchmark Athens Stock Exchange gaining 0.7% at 3:31pm local time. The gauge has fallen about 31% in the past 12 months, making it one of the worst performing major equity indexes tracked by Bloomberg. Yields on two-year notes climbed for a second day, gaining 18 basis points to 25.08%.
As the negotiations drag on, Greece has seen liquidity evaporate, pushing the economy back into recession. Record deposit withdrawals and the state's increasing difficulty in meeting debt payments have renewed doubts about the country's ability to stay in the euro. Key sticking points in the talks remain in areas such as budget targets, sales-tax rates, pension and labour market rules, Tsipras's spokesman Gabriel Sakellaridis said on Monday.
"We need to reach this deal very quickly because we are already almost months behind the original schedule," European Commission vice-president Valdis Dombrovskis told reporters in Brussels. "Originally it was planned that technical negotiations should be concluded by end of April. Now we are at end of May."
Even though no aid disbursements have been made to Greece since last summer, the country has managed to meet external payments by slowing down spending, building up arrears to suppliers and vendors, encouraging citizens to pay overdue taxes, and seizing the cash reserves of regional governments, hospitals, universities, and other public entities.
An exit from the euro "would be a full-scale disaster for Greece, including the collapse of its banks, severe devaluation of its new currency, poverty and hyperinflation," said Nicholas Economides, an economics professor at New York University's Stern School of Business.
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