A strong day for European markets came to an abrupt end yesterday as one of Greece’s creditors said there had been “no progress” in recent negotiations with the country.
Greece is currently trying to secure a cash-for-reforms bailout deal to stave off bankruptcy.
“We are well away from an agreement,” a spokesman for the International Monetary Fund (IMF) said yesterday.
“There are major differences between us in most key areas. There has been no progress in narrowing these differences recently.”
The stock market in Athens closed before the announcement was made, making a gain of eight per cent. But markets were still open in Germany, where strong gains in stock prices were immediately erased. A Greek government spokesman quickly responded, talking up progress in negotiations.
“The Greek delegation is ready, as agreed, to intensify the efforts in order to reach an agreement soon, even within the next hours,” he said.
Two big areas of disagreement are Greece’s budget surplus and its plans for debt restructuring.
Konstantinos Venetis, an economist at Lombard Street Research, believes creditors need be flexible in their approach to Greece’s debt mountain, which is currently around 180 per cent of GDP.
“Greece will ultimately need to restructure its debt so that it has the ability to pay it back, and to allow the economy to grow,” Venetis told City A.M.
“But the country’s creditors will also be worried about moral hazard.”
Spain’s anti-austerity party Podemos could gain further support if Greece secures a better deal.