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 Prime Minister Alexis Tsipras's three-month-old government is under
growing pressure at home and abroad to reach an agreement with
European and IMF lenders to avert a national bankruptcy. A new poll
showed over three-quarters of Greeks feel Athens must strike a deal
at any cost to stay in the euro.
An enlarged team of Greek negotiators was due to meet
representatives of the so-called Brussels Group of lenders to
discuss which reforms Greece will turn into legislation rapidly in
exchange for aid. Athens says it needs fresh aid before a 750
million euro payment to the IMF falls due on May 12.
Elected on promises to end austerity and scrap an unpopular EU/IMF
bailout program, Tsipras had so far refused to give ground on
so-called "red lines" - pensions, labor reform and state asset sales
- that are core to his leftist party's agenda.
But Athens said late on Wednesday it was ready to sell a majority
stake in its two biggest ports and to concede on value-added tax
rates and some pension reforms, in the clearest signal yet that it
is ready to back down for a deal.
"The Greek government is ready for an honest solution which will
unlock financial aid from partners and put an end to the economic
asphyxiation the bailouts have caused," Finance Minister Yanis
Varoufakis, who was sidelined from the bailout talks this week to
appease lenders, told Sto Kokkino radio.
The retreat came after a senior euro zone official involved in the
talks on Wednesday said that to secure any deal, Greece would have
to make a substantial concession on at least one of three disputed
issues - pensions, labor market reform and taxation.
Compounding the pressure on Athens, ratings agency Moody's cut
Greece's credit rating deeper into junk territory late on Wednesday
due to fears about whether a deal will be found in time to meet
upcoming debt repayments.
CONTAGION FEARS LIMITED
The Greek official said Athens could consider a flat VAT rate on all
goods and services except foods and books and could adjust
supplementary pension payouts, though it insists on not cutting
those below 300 euros a month.
The so-called "13th month" payment to pensioners has been a target
of some euro zone finance ministers whose countries have less
generous systems but are lending to Greece as part of a 240 billion
euro EU/IMF bailout.
On increasing the minimum wage - a campaign pledge by Tsipras that
is strongly opposed by lenders - the official said Athens would
consult with the OECD and the International Labour Organisation
before taking any action, the official said.
Labour Minister Panos Skourletis said Greece could resort to a
referendum if there was an impasse with lenders, but expressed
confidence a deal would be found that wins the support of lawmakers
from the ruling Syriza party.
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"I think that the measures will be such that they will be supported
by our parliamentary group," he told Greek television.
Athens' move to compromise comes amid growing signs that a Greek
default or exit from the euro would have far less effect on the rest
of the currency area than the financial chaos feared when Greece
last tottered close to bankrupty in 2012.
While Greece has seen its two-year bond yields surge to as high as
30 percent on fears of a default, other fragile peripheral euro zone
nations have seen borrowing costs fall to record lows due to an ECB
bond-buying plan.
In the latest sign that contagion from a Greek default would be
limited, Spain's economy grew at the fastest rate since 2007 in the
first three months of this year, data showed on Thursday.
In Portugal, a fellow euro zone weakling that exited its bailout
last year, a dual bond issue that raised 2.5 billion euros on
Wednesday meant the country had completed nearly two-thirds of its
2015 issuance needs, limiting the potential of a setback if yields
rose on worries over Greece.
However, Moody's cautioned in a report that a Greek departure could
have longer-term consequences.
"The impact of a Greek exit should not be underestimated," said
Alastair Wilson, Moody’s managing director for global sovereign
risk.
"The direct impact might be limited because of Greece's limited
trade links and lower financial market exposure to Greece in other
euro area countries. But its exit could nevertheless cause a
confidence shock and disrupt government debt markets," he said.
(Additional reporting by Angeliki Koutantou, Writing by Deepa
Babington; Editing by Paul Taylor)
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