Greece will begin talks with representatives of its creditors tomorrow as it tries to have reform proposals approved, allowing it access urgently needed cash.
Greek finance minister Yanis Varoufakis yesterday denied that the it spelled a return of a the Troika – a term for its three main creditors that Varoufakis had said was “dead”.
The representatives of the Troika – the International Monetary Fund (IMF), the European Commission (EC) and the European Central Bank (ECB) – will meet with Greek officials in Brussels and Athens to hammer out a deal.
Varoufakis protested that the Troika he referred to were representatives of the three organisations who were a “cabal of technocrats that used to enter ministries with power play that smacked of colonial attitude. It’s finished.” He now insists the situation is different and refers to the IMF, the ECB and the EC as the institutions.
Greece will propose seven more reforms tomorrow that Varoufakis said would have to do mainly with taxation.
Jeroen Dijsselbloem, president of the group of Eurozone finance ministers, said the last two weeks had been a “waste of time” and that talks must begin tomorrow as there is “no time to lose.”
Greece currently has its bailout extended until the end of June. If Greece’s new proposals are approved it will receive a final slice of its bailout loan, which it needs as its finance ministry is set to run out of cash this month.
Pressure will be on Greece to make progress with the ECB to decide this week whether the ceiling for emergency lending to Greek banks should be lifted, according to Greek newspaper Kathimerini. The decision will be made on either tomorrow or Thursday. It is a week earlier than scheduled, suggesting that Greek banks may again be losing cash to deposit withdrawals. A denial may result in the imposition of capital controls.
Meanwhile, both the European Central Bank and national central banks of the Eurozone kicked off their purchases of government debt yesterday.
Under the plan, national central banks will mostly buy up stocks of their own government’s bonds. The current size of purchases is €50bn (£36bn) a month for government debt and €10bn of private sector debt.
ECB chief Mario Draghi has said the purchases will last until September 2016 or until inflation returns to its target of just below two per cent. It is currently minus 0.3 per cent.
The biggest purchases will have to be made by Germany, followed by France, Italy and then Spain. Bond yields (the return on debt at its purchase) fell across the Eurozone yesterday with some nearing record lows.
Germany’s 10-year bond yield fell to 0.32 per cent. German yields are now negative on maturities of up to seven years. That means investors receive less money in seven years time if they buy the bond now.
However, if negative inflation persists, that smaller amount of money could buy a greater amount of goods and services than it could today.