World Economy

Greece Says Loan Deal ‘Very Close’

Greece Says Loan Deal ‘Very Close’
Greece Says Loan Deal ‘Very Close’

Greece and its international creditors are "very close" to a loan deal, a Greek junior minister said Sunday, a day ahead of a key meeting in Brussels.

"After weeks of painful negotiation, if the other side is willing, it will become apparent that... the deal is very close and will be sealed in the coming period," AFP quoted Euclid Tsakalotos as saying.

Tsakalotos, a junior foreign minister, is one of Greece's main negotiators. He said Greece and its creditors were "politically apart" on labor and pension issues and that some areas "will remain open until the last minute".

At a meeting of eurozone finance ministers Monday, Greece is hoping for a "positive statement" on negotiations that will allow for a section of €7.2b ($8.08b) in remaining bailout loans to be released, officials have said.

However, European officials have played down the likelihood of a deal actually emerging on Monday.

Greece has been squeezing funds from the central and local governments to be able to meet its international loan payments, with concerns that within a matter of weeks it could default and face a messy exit from the euro.

But a loan repayment of €750m due on Tuesday to the IMF will be honored, according to sources in Athens.

Greece Posing a Threat

It may only account for two percent of the eurozone economy but Greece has a habit of punching above its weight when it comes to bruising the currency union, AP said.

And there are fears it could be once again posing a threat to an otherwise burgeoning recovery.

Official figures on Wednesday are expected to show that the 19-country eurozone grew by 0.4 percent in the first quarter of 2015 from the previous three-month period. That's up from the 0.3 percent recorded in last quarter of 2014 and would be the eurozone's highest growth rate since the second quarter of 2013, when it emerged from its longest-ever recession.

In the first quarter, Germany, Europe's biggest economy, is expected to have led the way, its export-heavy economy prospering from the fall in the value of the euro.

Efforts bearing Fruit

Other bright lights include Spain, one of the countries at the forefront of the region's debt crisis over the past few years that has gained plaudits from European policymakers for reforming its economy, particularly the labor market. Economists think those efforts are now bearing fruit.

"We think that if you look at the current situation in the eurozone it is about as close to being the dream scenario backdrop as anyone could have realistically hoped a year or more ago to help to kick-start a meaningful recovery," said Ben May, leading eurozone economist at Oxford Economics. May is predicting growth of 0.8 percent.

Source of Concern

"While it is encouraging that the recovery is becoming more broad-based across the euro area, there are clearly still pockets of vulnerability, with Greece an obvious source of concern," said Timo del Carpio, European economist at RBC Capital Markets, who is forecasting eurozone growth of 0.5 percent in the first quarter.

The headline growth rate, whatever it is, will mask the likely fall back into recession of Greece barely a year after it emerged from one of the developed world's deepest downturn since World War II.

For over three months, talks have dragged on as the Greek government tries to come up with a series of economic and budget reforms that will convince the creditors to pay out 7.2 billion euros ($8 billion) of bailout cash. With every passing day, the uncertainty has sharpened, to the detriment of the Greek economy. Greeks have been pulling money out of banks and investors have shied away from the country.