Greece Faces Moment Of Truth: Troika To Present Final Offer On Wednesday

Tuesday was an interesting day for negotiations between Athens and creditors. Recall that after venting his frustrations in a lengthy op-ed over the weekend, Greek PM Alexis Tsipras submitted what he called a “realistic plan for an agreement” ahead of an emergency meeting in Berlin between French President Francois Hollande, German Chancellor Angela Merkel, ECB chief Mario Draghi, and European Commission President Jean-Claude Juncker. 

That meeting ended without any indication of concrete progress suggesting the group was either not impressed with what Tsipras had proposed or simply didn’t care and spent their time discussing a final, take it or leave it deal to send to Athens.

By Tuesday morning it was clear that the troika was well on the way to drafting their own proposal. Fed up with Greece, the institutions had apparently decided to simply draft an agreement on their terms and place on X on the line where Tsipras needed to sign if he wanted to avert a default in three days. 

The troika acknowledged that the deal they were crafting would be a tough sell to the radical members of Syriza and thus would be difficult for Tsipras to get through parliament, setting up what we have predicted all along: an imminent government reshuffle.

The fact that the draft deal will contain language that forces Tsipras to concede at least a portion of Syriza’s campaign promises was later confirmed when Eurogroup President Jeroen Dijsselbloem was quoted as saying creditors would “not meet Greece halfway.” 

Reuters is out with the latest, which serves as further confirmation that Tsipras will now be forced into concessions and the troika will have succeeded in using financial leverage to effect what will almost invariably be a government shakeup in Athens. 

Via Reuters:

Greece's creditors on Tuesday drafted the broad lines of an agreement to put to the leftist government in Athens in a bid to conclude four months of acrimonious negotiations and release aid before the cash-strapped country runs out of money…

 

"It covers all key policy areas and reflects the discussions of recent weeks. It will be discussed with (Greek Prime Minister Alexis) Tsipras tomorrow," a senior EU official said.

 

Another official said German Chancellor Angela Merkel and French President Francois Hollande would put the plan to Tsipras by telephone within hours to try to secure his acceptance…

 

Tsipras, who has vowed not to surrender to more austerity, tried to pre-empt a take-it-or-leave-it offer by the creditors, sending what he called a comprehensive reform proposal to Brussels on Monday before they could complete their version.

 

Euro zone officials branded the Greek text insufficient and said it was not formally on the table.

 

The Greek leader faces a backlash from his own supporters if he has to accept cuts in pensions and job protection to avert a default and keep Greece in the euro zone.

 

Despite defiant rhetoric and face-saving efforts, he seems likely to have to swallow painful pension and labor reforms, facing the choice between putting them to parliament at the risk of a revolt in his Syriza party, or calling a snap referendum.

Reuters also suggests that Greece will likely not make a €300 million payment due to the IMF on Friday if Tsipras does not accept the proposal:

A Greek government official said Athens would make a 300 million euro ($329.58 million) repayment to the IMF on Friday as due if there was an agreement with the creditors, hinting it might otherwise withhold the money without saying so explicitly.

 

"If we judge that a deal has been sealed, then we will make the June 5 payment normally," the official said, adding that the money would be transferred even if a preliminary agreement had not yet been approved by Eurogroup finance ministers.

It appears we will know within the next 48 hours the extent to which Tsipras was forced by creditors to abandon Greek voters in order to save them from economic catastrophe.