Greece says deal with creditors is close; markets rally

Costas Baltas/InTime News via APGreece's Prime Minister Alexis Tsipras

Costas Baltas/InTime News via APGreece's Prime Minister Alexis Tsipras

Greece's prime minister said Wednesday that his country is close to reaching a deal with bailout creditors, prompting European stock markets to jump on hopes of a breakthrough in the slow-moving, often acrimonious talks.

Alexis Tsipras spoke shortly before Greek negotiators were due to meet in Brussels with representatives of the bailout creditors — whose cash has kept Greece from bankruptcy for the past five years.

“We have taken very many steps. We are in the home stretch, close to the final agreement,” Tsipras told reporters, after a meeting at the finance ministry in Athens.

“I believe that very soon we will be able to present new information.”

But he warned stumbling blocks remain, as Greece is dealing with three different creditor institutions — the International Monetary Fund, European Commission and European Central Bank — “that have often conflicting opinions.”

Greek and European stocks rallied earlier Wednesday when government officials said negotiators will start drafting a staff-level agreement with bailout creditors in Brussels to unlock aid that would allow the country to make a debt repayment as soon as next week.

The main Athens stock index rallied to close up 3.6 percent, with most of the gains registered just before closing. Other European markets also posted gains, with Germany's up 1.3 percent and France's bouncing 2.1 percent.

Earlier, a Greek government official said the putative deal would include debt-restructuring, sales tax reforms, balanced budgets and a cut in early retirements. The official, who spoke on customary condition of anonymity, insisted it would not involve further pension or salary cuts.

But a person close to the negotiations in Brussels said there is no confirmation that a deal is being finalized.

“The Brussels group has not even started as the planes are all delayed due to the closure of airspace in Belgium. So, no confirmation,” the official said. Flights to Belgium were disrupted Wednesday due to a power failure.

Since the start of Greece's bailout program in 2010, its creditors have been releasing rescue loans on condition the country implements strict austerity measures.

Tsipras' radical left-led government needs a deal for the latest installment by June 5, when it has to repay some 300 billion euros to the IMF.

Athens has said it lacks the funds to pay its creditors unless a deal is struck in time. Failure to do so could set Greece on a slippery slope that could see it impose limits on money withdrawals to avoid a bank run, and eventually even leave the eurozone.

Earlier Wednesday, U.S. Treasury Secretary Jack Lew spoke on the phone to Tsipras. A Treasury Department statement said Lew “reiterated that failure to agree on a path forward would create immediate hardship for Greece and broad uncertainties for Europe and the global economy.”

Speaking at the London School of Economics, Lew warned of the potential risks globally.

“It's a mistake to think that a failure has no consequences outside of Greece. We don't know the exact scope.”

Lew was in London before heading to Dresden, Germany, for a meeting of the Group of Seven economic powers.

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