Greece is expected to reach an agreement with its international creditors within the next week, Finance Minister Yanis Varoufakis has said.
The Greek government is fast running out of money and is due to make a payment of €1.5 billion ($1.7 billion) to the International Monetary Fund (IMF) on June 5.
Yanis Varoufakis told Star TV a deal with creditors was “very close” and denied Greece might leave the eurozone.
“Another currency is not on our radar,” he said.
PM Alexis Tsipras also talked up the prospect of a deal in a speech to Greek business figures earlier, saying the government was “in the final straight” before a deal.
Greece has been locked in negotiations with the EU and IMF over economic reforms they say must be implemented before the final €7.2 billion tranche of the country’s €240 billion bailout is released.
Issues over pension reform, taxation, deregulation of the labor market, and the re-hiring of 4,000 former civil servants are yet to be resolved.
Last week, the government emptied its IMF reserves in order to pay €750 million in debt interest on its existing loans.
An apparent proposal from European Commission President Jean-Claude Juncker emerged in Greek newspaper To Vima on May 18 before a spokeswoman quickly said she was unaware of it.
However, the plan for emergency funding and smaller primary surplus targets, in return for limited Greek fiscal reforms worth €5 billion, was not completely denied.
A Commission spokeswoman said she was unaware of Jean-Claude Juncker’s reported proposal.
The status of Jean-Claude Juncker’s proposal was unclear, but European Economic Affairs Commissioner Pierre Moscovici complained in Berlin that the left-led government was “more eager to say what they don’t want to keep in the program than to propose alternatives”.
Greek media reported on May 19 that the government had sent proposals to its international creditors to revamp VAT rates in an attempt to tackle tax evasion.
Alexis Tsipras is due to attend the EU Eastern Partnership Summit in Riga, where Greece is likely to be a key topic.
Yanis Varoufakis said a payment deal was on the cards, but insisted he would reject any compromise he considered “non-viable”.
European Commission spokesman Margaritis Schinas has welcomed the commitment by the Greek government to bring the talks to a conclusion, but said more time and effort was needed “to bridge the gaps on the remaining open issues in the negotiations”.
A defiant Greece has decided to rehire thousands of public sector workers, including cleaning ladies, despite sustained pressure from its international creditors.
Greek lawmakers passed a law to give back jobs to some 4,000 workers who were laid off under severe austerity cuts.
The move comes as Athens seeks a deal on more financial aid ahead of a meeting of eurozone finance ministers on May 11.
Greece is running out of money as it has to pay €750 million ($845 million) to the International Monetary Fund (IMF) on May 12.
International creditors have demanded cuts in spending, including plans to trim the civil service and privatization of state assets, in order for Greece to continue receiving loans.
On May 7, the Greek parliament adopted a bill to rehire school guards, cleaning ladies and civil servants who lost their jobs or were earmarked for dismissal under the austerity program.
In 2014, 32 cleaning ladies sacked by the Greek finance ministry came to the European Parliament in Strasbourg in France to plead their case.
The insistence of the cleaners – who were replaced by cheaper workers – made them famous all over Greece.
Yesterday’s bill in the Greek parliament does not violate the terms of a massive bailout by the EU and IMF, which allows Athens to hire one public employee for every five who leave.
However, the move – combined with the reopening of the public broadcaster ERT – is likely to face criticism from the eurozone negotiators.
The talks with the IMF and EU are expected to continue over the weekend.
EU officials say a deal is unlikely before Greece has to make the IMF payment on May 12.
Eurozone officials say no further loans will be released until further economic reforms have been agreed.
Greece needs progress at May 11 meeting because that is likely to affect the willingness of the European Central Bank to allow the continued emergency lending that is keeping Greek commercial banks afloat.
Greek Finance Minister Yanis Varoufakis insisted the country would meet May 12 deadline.
Yanis Varoufakis also rejected the view that Greece had been reckless with bailout money, saying that 91% of the bailout funds his country had received so far had been spent on repaying banks, particularly northern European banks such as Germany’s – rather than helping Greece’s economy.
Yanis Varoufakis again stressed that Greece had no intention of leaving the euro.
Greece met its deadline on May 6 for a repayment for €200 million.
According to German finance minister Wolfgang Schauble, Greece would struggle to find creditors outside the EU and IMF.
Wolfgang Schauble said Greece would be welcome to try to find investment from Beijing or Moscow, but may have difficulties.
His warning came after fears of a Greek debt default saw its borrowing costs jump 3.5 percentage points to 27%.
Greek Finance Minister Yanis Varoufakis said his government refuses to consider leaving the EU: “Toying with Grexit… is profoundly anti-European.”
Yanis Varoufakis also promised to “compromise, compromise, compromise without being compromised” to satisfy current creditors.
Wolfgang Schauble and Yanis Varoufakis were speaking at talks in Washington.
On April 15, ratings agency S&P downgraded Greece’s credit rating.
Yields also rose on longer-term Greek borrowing, with the 10-year bond yield – the amount investors demand for lending – rising one percentage point to 13%.
Wolfgang Schauble said that the Greek government needs to find creditors.
“The Europeans have said, OK, we are ready to do it [lend money] until 2020… If you find someone else, whether it’s in Beijing, in Moscow, in Washington DC, or in New York who will lend you money, ok, fine, we would be happy. But it’s difficult to find someone who is lending you in this situation amounts [of] €200 billion.”
He added that Greece must focus on increasing its competitiveness and primary surplus.
Wolfgang Schaeuble was speaking after the Greek government’s borrowing costs surged on April 16.
According to the Financial Times, Greece had made an “informal approach” to the International Monetary Fund to have its bailout repayments delayed, but had been rebuffed.
However, IMF chief Christine Lagarde said at the World Bank spring meeting in Washington: “We have never had an advanced economy asking for payment delays.
“Payment delays are analysed as additional financing granted to that country. Additional financing means additional contribution by the international community – some of which are in much direr situations than the country eventually seeking those delays.
“Payment delays had not been granted by the board of the IMF in the last 30 years and it was eventually granted to a couple of developing countries and that delay was not followed by very productive results.
“It’s clearly not a course of action that would actually fit or be recommendable in the current situation.”
Greece owes the IMF some €1 billion ($1.06 billin) in repayments next month.
Many in the markets think the Greek government will struggle to make those payments if it does not agree an economic reform package with European creditors soon.
Failure to agree a plan with creditors will mean that the country will default, a development that could force the government to put limits on money transfers and even lead Greece to leave the euro.
EU spokesman Margaritis Schinas said on April 16 that the EU was “not satisfied with the level of progress made so far” in debt negotiations.
Wolfgang Schauble had warned that he did not expect an agreement between Athens and its creditors in the next week.
However, Greek PM Alexis Tsipras on April 16 said he was “firmly optimistic” the Greek government could reach a deal with its creditors.
“Despite the cacophony and erratic leaks and statements in recent days from the other side, I remain firmly optimistic that there will be an agreement by the end of the month,” Alexis Tsipras said.
According to Alexis Tsipras, several points of agreement had been found since talks first started, including on areas such as tax collection, corruption and initiatives to distribute the tax burden on those who have the ability to pay.
HEe said the two sides still disagreed on four areas: labor issues, pension reform, an increase in value-added taxes and privatizations, which he referred to as “development of state property”.
In a later tweet, Alexis Tsipras said he was “certain that Europe will choose the path to democracy”.
The Greek government is preparing to present a list of reforms to lenders in order to secure a bailout extension.
The list to be submitted on February 23 must be approved by international creditors to secure a four-month loan extension.
Analysts say a collapse of the deal would revive fears of a Greek exit from the euro.
Minister of state Nikos Pappas said the list would include measures to tackle tax evasion and streamline the civil service.
German newspaper Bild, citing an unnamed source, reports that Greece aims to recover 7.3 billion euros ($8.3 billion) with measures to combat tax evasion.
A spokesman for the German finance ministry, Martin Jaeger, was quoted as saying by Reuters news agency that Berlin expected the Greek plan to be “coherent and plausible”.
Greece agreed at a meeting with its EI and IMF lenders on February 20 to submit the list of reforms before February 24.
Bild, Germany’s biggest-selling newspaper, was publicly attacked on February 20 by Greek Finance Minister Yanis Varoufakis who remarked about an earlier story: “One must believe @BILD’s tall stories [about Greece] at one’s peril.”
In a new article, the newspaper breaks down what it says is a tax hit list devised by the Greek government.
It will reportedly seek to raise 2.5 billion euros from the fortunes of rich Greeks, 2.5 billion from back taxes owed by individuals and businesses, and 2.3 billion from a crackdown on tobacco and petrol smuggling.
Martin Jaeger said the Greek reform plan, once received, would be examined by Greece’s three creditors – the European Central Bank, the European Commission and the IMF.
Once the three lenders had delivered their opinion, it would be discussed by eurozone finance ministers in a conference call on February 24, he said, according to Reuters.
Yanis Varoufakis has said the bailout agreement will be “dead” if the list of reforms his government is drafting is not approved.
The new Greek government, led by PM Alexis Tsipras, was elected by promising to reverse austerity.
The four-month extension deal is widely regarded as a major climb-down for PM Alexis Tsipras, who won power vowing to reverse budget cuts.
China overtakes the USA as the world’s largest economy, according to figures from the International Monetary Fund (IMF).
The figures are adjusted for Purchasing Power Parity (PPP).
According to the IMF, the combined purchasing power of China’s citizens now outstrips that of America’s. By the end of 2014, China should make up 16.48& of the world’s purchasing-power adjusted GDP for a total of $17.632 trillion.
The US economy, by contrast, will make up 16.28%, or $17.416 trillion.
China overtakes the USA as the world’s largest economy in 2014
Purchasing power parity seeks to address the fact that while wages tend to be lower in “developing” countries than in mature economies like the US, the price of goods and servicing is also typically much lower.
The Economist’s Big Mac Index, for example, quotes the price of the McDonalds staple in July at $4.80 in the US, but just $2.73 in China.
PPP, therefore, bases economic output on what a country’s citizens can purchase, as opposed to an unadjusted GDP figure using market exchange rate, which is more often quoted.
However, the figure is controversial. It requires the comparison of a huge amount of goods and services, and is therefore a vast statistical undertaking that can only be conducted infrequently with estimates used during intervening periods. The methods used to collect the data have also led to controversy in the past.
When it comes the raw GDP data base on exchange rates, China will eventually also overtake the US if it carries on growing as it has, but that is still likely to take many years.
The IMF has approved a $17.1 billion bailout for Ukraine to help the country’s beleaguered economy.
The loan comes amid heightened military and political tension between Ukraine and neighboring Russia.
The loan is dependent on strict economic reforms, including raising taxes and energy prices.
The money will be released over two years, with the first installment of $3.2 billion available immediately.
The head of the International Monetary Fund, Christine Lagarde, said the fund would check regularly to ensure the Ukrainian government followed through on its commitments.
The IMF has approved a $17.1 billion bailout for Ukraine to help the country’s beleaguered economy
In March Ukraine put up gas prices by 50% in an effort to secure the bailout.
The government has also agreed to freeze the minimum wage.
The bailout had to be approved by the IMF’s 24-member board, which includes a Russian representative.
The IMF loan will also unlock further funds worth $15 billionn from other donors, including the World Bank, EU, Canada and Japan.
In December last year, Ukraine agreed a $15 billion bailout from Russia, but this was cancelled after protests forced out pro-Russian President Viktor Yanukovych.
On Wednesday, the IMF warned that Russia was “experiencing recession” because of damage caused by the Ukraine crisis.
The fund said $100 billion would leave Russia this year, partly caused by the US and EU sanctions.
The sanctions were imposed after Russia annexed the Crimea region from Ukraine last month.
The IMF bailout will also make available $1 billion in loan guarantees from the US, which was recently approved by Congress.
Earlier on Wednesday, an international conference in London ended with a commitment to help Ukraine recover tens of billions of dollars worth of assets which were allegedly stolen by the ousted President Viktor Yanukovych and his allies.
In a statement to the International Monetary Fund, US Treasury Secretary Jacob Lew has urged other countries to contribute more to the economic rescue of Ukraine.
Jacob Lew told the IMF that Ukraine’s “sizeable financing needs” meant other nations must add to its $1 billion (720 million euros) loan guarantee.
The appeal came as Ukraine’s interim PM Arseniy Yatsenyuk offered to devolve more powers to eastern regions.
Pro-Russian separatists there are defying the government.
Meanwhile, Washington on Friday announced a third round of sanctions against individuals it has linked to Russia’s annexation of Crimea.
The US Treasury said it had frozen the US-based assets of one former Ukrainian official, a Crimea-based energy firm and six Crimean leaders, including the chairman of the Crimea electoral commission and the mayor of Sevastopol.
Jacob Lew says the US is “bolstering the IMF program through a complementary aid package, which includes a $1 billion loan guarantee and additional technical assistance,” in a statement to the IMF.
Treasury Secretary Jacob Lew has urged other countries to contribute more to the economic rescue of Ukraine
“It is critical that the international community – multilateral development banks and bilaterals – take immediate steps to also support the IMF program by providing financing support, given the sizeable financing needs,” he adds.
The IMF announced a rescue package worth as much as $18 billion last month in a bid to aid Ukraine’s economy, and this has been bolstered to $27 billion with contributions from Europe and the US.
In exchange, the IMF has demanded from Ukraine strict government spending cuts and tax increases.
Ukraine is being squeezed by Russia’s decision this month to stop providing Ukraine with subsidized natural gas.
That discount had been agreed between Russian President Vladimir Putin and Ukraine’s then President Viktor Yanukovych, in which Russia also said it would buy $15 billion-worth of Ukrainian government bonds.
The IMF is also asking Ukraine to crack down on corruption and end central bank support for the Ukrainian currency.
Ukraine’s new government has said it needs $35 billion to pay its bills over the next two years.
Ukraine has not paid off its debt to Russian gas supplier Gazprom despite the passing earlier this week of a deadline for the nation to start reducing its debt. Gazprom says Ukraine owes it $2.2 billion.
European Energy Commissioner Guenther Oettinger told Austria’s ORF radio he was working on a plan to help Ukraine pay its gas bills to ensure its debts do not rise.
On Friday, President Vladimir Putin moved to assure the EU it would not cut off gas supplies. Brussels said it would stand with the new authorities in Kiev if the Kremlin carries out a threat to turn off the tap to Ukraine.
“I want to say again: We do not intend and do not plan to shut off the gas for Ukraine,” Vladimir Putin said in televised comments at a meeting of his advisory Security Council, the Reuters news agency reported.
Russia has turned off the gas tap to Ukraine before, in 2006 and 2009. As the 2009 row escalated, gas supplies to Europe through Ukraine were suspended for two weeks.
But Russia may be reticent about doing it again as it is dependent on revenue from EU customers.
Talks between Russia, Ukraine, the US and the EU – the first four-way discussions since the crisis began – are scheduled to take place on April 17 in Geneva.
The International Monetary Fund has admitted that it made mistakes in handling Greece’s first international bailout.
The IMF said it was too optimistic in its growth assumptions and said a debt restructuring should have been considered earlier.
Greece was granted a 110 billion euro ($145 billion) bailout by the IMF and EU in May 2010.
Another 130 billion euro rescue package was approved in February 2012.
Greece’s first bailout came amid fears the country would default on its debts and that it could spark debt contagion in the eurozone.
The IMF has now released a study looking at the handling of the programme.
It admitted that it bent its own rules on exceptional access for the programme to go ahead.
To justify exceptional access, one of the four criteria that must be met is that public debt is sustainable in the medium term.
But the IMF said: “Even with implementation of agreed policies, uncertainties were so significant that staff were unable to vouch that public debt was sustainable with high probability.”
But staff wanted to go ahead with exceptional access because of fears that any spillovers from Greece would threaten the rest of the eurozone and the global economy.
The IMF then amended the criterion to where debt was not sustainable with high probability, “a high risk of international spillover effects provided an alternative justification”.
The IMF has admitted that it made mistakes in handling Greece’s first international bailout
The IMF described the programme, which ran from May 2010 to March 2012, as a “holding operation” that gave the euro area “time to build a firewall to protect other vulnerable members and averted potentially severe effects on the global economy”.
It said it had notable successes such as achieving strong fiscal consolidation, Greece remaining in the eurozone and any spillovers that might have had a severe impact on the global economy were relatively well-contained.
But it also said there were notable failures, chiefly market confidence was not restored, the banking system lost 30% of its deposits and the Greek economy experienced a much deeper-than-expected recession.
Greece’s economic output (GDP) in 2012 was 17% lower than in 2009, compared with the IMF and EU’s initial projection of a 5.5% decline. The original growth projections were not marked down until the fifth review in December 2011.
The unemployment rate in 2012 was 25%, compared with the original programme projection of 15%.
The IMF added that in future Fund staff should be more skeptical about official data.
The Fund also criticized the delay in restructuring Greece’s massive debt load by forcing private holders of Greek bonds to take losses, which eventually took place in the first half of 2012.
“Not tackling the public debt problem decisively at the outset or early in the programme created uncertainty about the euro area’s capacity to resolve the crisis and likely aggravated the contraction in output,” the report said.
It said an upfront debt restructuring would have been better for Greece but this was “not acceptable to the euro partners”, some of whose banks held large amounts of Greek government debt.
The report also said there was no clear division of labor between the IMF, the EU and the European Central Bank, the so-called “troika”.
It said that while there were “occasional marked differences of view” within the troika, these were generally not on display to the authorities so did not risk slowing negotiations, and noted that “co-ordination seems to have been quite good under the circumstances”.
Cyprus has officially agreed to a set of measures that will release a 10 billion-euro ($12.8 billion) IMF-EU bailout.
The IMF, which is contributing 1 billion euros, says they are “challenging” and will require “great efforts” from its population.
The measures will consist of doubling taxes on interest income to 30% and raising corporation tax from 10% to 12.5%.
The plan, designed to stabilize Cyprus banking system and government finances, was agreed in principle last week.
Cyprus has agreed to a set of measures that will release a 10 bn-euro IMF-EU bailout
Cyprus’s new finance minister Harris Georgiades, speaking on his first day in the post, said he was determined to honor the country’s commitments: “The responsibility is great, and the expectations of our citizens greater. Our promise is that we will make every effort for what is best for the nation. Under your guidance I am sure we will succeed.”
Harris Georgiades appointment followed the resignation of Michalis Sarris on Tuesday.
The plans for the two largest banks, Bank of Cyprus and Laiki, are especially controversial, as they will involve heavy losses for depositors with large balances in their accounts.
The IMF, which is providing 10% of the bailout money, said 95% of account holders would be protected.
The majority of accounts have less than 100,000 euros in them, which will not be affected.
However, depositors with more than 100,000 euros will lose some of their savings. Although the exact amount has still not been decided, reports have said they could lose up to 60%.
Cyprus agreed last week to shut down Laiki and transfer deposits of under 100,000 euros to Bank of Cyprus.
The IMF’s managing director, Christine Lagarde, said Cyprus would need to pull together: “This is a challenging programme that will require great efforts from the Cypriot population.”
Christine Lagarde added that its aim was to spread the pain, and “seek to distribute the burden of the adjustment fairly among the various segments of the population and to protect the most vulnerable groups”.
Cyprus is in recession, with unemployment at around 15% and gross domestic product (GDP) down by 3.5% this year.
The country is already planning to introduce austerity measures equivalent to 5% of GDP between 2013 and 2015 through tax rises and spending cuts, but Christine Lagarde said further measures were needed.
The IMF chief said the corporation tax increase and raising of the tax on interest rates to 30% would help bring in another 2% of GDP.
In order to tackle its debt, additional cuts worth 4.5% of GDP would also be needed over the medium term to reach the target of a budget surplus of 4% of GDP by 2018, the IMF said.
Cypriot President Nicos Anastasiades warned there would be “difficult days ahead” that demanded a collective effort.
The IMF said the reform programme would also lead to changes in banking supervision and transparency.
Cyprus’s banking system has been seen by some as a haven for firms, particularly Russian businesses, who wish to avoid close scrutiny of their affairs.
The IMF said that the international rescue effort, which also involves the EU and the European Central Bank (ECB), would be “well paced”.
The IMF’s contribution will need to be ratified by its board in the coming weeks.
Cyprus’ Finance Minister Michael Sarris has announced the country has made “significant progress” in talks with the EU and IMF aimed at securing a bailout.
Michael Sarris was also quoted as saying Cyprus was considering a 25% levy on deposits of more than 100,000 euros in its biggest bank.
Cyprus has to raise 5.8 billion euros ($7.5 billion) before Monday to secure a 10 billion-euro loan.
Parliament has approved restructuring the island’s banks, among other moves.
But it rejected a levy earlier this week, before EU pressure brought the proposal back to the table. The rejected proposal included a levy on smaller deposits.
On Saturday afternoon more than 1,000 bank employees marched to the Cypriot finance ministry, stopping briefly at the presidential palace on the way.
Marchers held placards with slogans such as “No to the bankruptcy of Cyprus” and chanted “United we cannot be defeated”.
Michael Sarris was speaking after talks with the “troika” of the EU, the European Central Bank (ECB) and the IMF.
“Significant progress has been made toward an agreement at least with the troika which will report to the Eurogroup,” he said.
“Two or three issues need further work.”
Cyprus has made significant progress in talks with the EU and IMF aimed at securing a bailout
Michael Sarris said experts were now discussing these issues, and the talks would resume later on Saturday afternoon with the aim of finalizing the package.
Cyprus’ President Nicos Anastasiades and party leaders were considering a trip to Brussels depending on the outcome of the meeting.
The Eurogroup, of 17 eurozone finance ministers, will meet to discuss the Cyprus bailout at 18:00 local time on Sunday, its president Jeroen Dijsselbloem tweeted.
The ECB has given Cyprus until Monday to raise the bailout money.
If Cyprus fails, the ECB said it would cut off funds to the banks, meaning they would collapse, possibly pushing the country out of the eurozone.
Cyprus now needs to find out what money-raising measures the EU will accept before putting them to a vote.
Germany is essentially writing the rules for the eurozone, and the message coming from Brussels and Berlin is that the money has to come from the banking sector and investors who have benefited from high interest rates over recent years.
Germany has voiced opposition to another measure approved by the Cypriot parliament on Friday – nationalizing some pensions to pay into a solidarity fund along with other assets.
Germany has also made it clear that it will no longer accept an economy within the eurozone that is dominated by its status as an economic tax haven, our correspondent adds.
Leading Cypriot bankers have urged parliament to accept a levy, with small savers exempted.
On Tuesday, parliament overwhelmingly rejected a levy that would have made small savers pay 6.75%, while larger investors would have paid 9.9%.
The proposal had provoked widespread anger among both ordinary savers and large-scale foreign investors, many of them Russian.
The government fears a levy would prompt foreign investors to withdraw their money, destroying one of the island’s biggest industries.
Michael Sarris travelled to Moscow this week to seek Russian support for alternative funding methods, but Russia said it would only act after the EU reached a deal with Cyprus.
Among nine bills approved on Friday, Cyprus MPs voted to restructure the banking sector, starting with the second-largest and most troubled lender, Laiki (Popular) Bank.
Under the restructuring, troubled lenders will be split into so-called good and bad banks, protecting smaller deposits but allowing levies on bigger ones.
There is now speculation that the biggest lender, the Bank of Cyprus, will also be restructured.
Parliament also voted for capital controls to prevent large withdrawals from Cyprus.
Banks in Cyprus have been closed since Monday and many businesses are only taking payment in cash.
Anthanasios Orphanides, former governor of the Cyprus Central Bank, said Cyprus was a victim of German domestic political pressures ahead of a general election there later this year.
German Chancellor Angela Merkel and her party needed to avoid being accused of using “German taxpayers’ money to pay off Russian oligarchs”.
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