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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Greek finance minister hails 'very good' meeting on debt relief - as it happened

Finance minister Euclid Tsakalotos says today’s meeting was good for Greece, and Europe
Finance minister Euclid Tsakalotos says today’s meeting was good for Greece, and Europe Photograph: Eurogroup

Closing Summary: A good day in the Greek crisis

Long experience of the eurozone debt crisis means we shouldn’t get too excited tonight.

Today’s extraordinary meeting does seem to have made real progress, but the next two weeks could still see some turbulence. And Greece’s long-term economic prospects remain deeply troubled, even if it does get finally some debt relief.

But this could still be remembered as a moment when the crisis eased a little, meaning the eurozone could experience a summer free of debt dramas.

Three things have been agreed:

1) Greece is on the brink of receiving a much-needed slug of bailout cash, after eurozone finance ministers welcomed its latest package of austerity measures, tax rises and pension reforms

2) However, the eurogroup are demanding more work on contingency measures in case Greece cannot hit its bailout targets. A compromise is being hammered out, which means Greece won’t have to vote specific measure into law right now.

3) In a historic step, ministers actually talked about how to cut Greece’s debt burden. However, in the short-term, it is only considering relatively modest changes. In the medium term, though, Greece could be granted longer grace and payment periods. And in the long-term, further debt writedowns could be considered.

Euclid Tsakalotos and Jeroen Dijsselbloem chatting at today’s meeting.
Euclid Tsakalotos and Jeroen Dijsselbloem chatting at today’s meeting. Photograph: Geert Vanden Wijngaert/AP

The FT’s Mehreen Kahn has dubbed it a “baby steps” approach. But encouragingly, both sides appear happy tonight.

European Commissioner Pierre Moscovici described the situation as “work in good progress”, suggesting that officials would make good progress before the next meeting on 24 May.

And Greece’s finance minister, Euclid Tsakalotos, also seemed cheerful, declaring that:

“It was a very good Eurogroup for Greece and I think a very good Eurogroup for Europe.”

This point has also just echoed by prime minister Alexis Tsipras, who is claiming success in his handling of the crisis.

Tsakalotos did admit, though, that there wasn’t a “meeting of minds” on the debt relief issue....

But there’s one major question mark tonight - we still don’t know if the International Monetary Fund is going to accept this plan, and come on board.

Leaving the eurogroup meeting, Finland’s Alex Stubb said this is crucial. He simply doesn’t have a mandate for a Finnish involvement in the Greek bailout unless the IMF are there too, for example.

And there would be merry hell in the Bundestag too if the IMF walked away.

So, plenty of opportunity for twists and turns in the next two weeks, until the eurogroup meets again on the 24 May.

For now, though, most commentators agree this has been that rare thing, a good day for Greece.

So let’s enjoy that. Goodnight, and thanks for reading and commenting! GW

Updated

Tsipras welcomes move towards debt relief

Over in Greece, prime minister Alexis Tsipras is welcoming the progress made in Brussels today.

Given the scale of last weekend’s anti-austerity protests, Tsipras is understandably keen to argue that he’s making progress. The commitment to debt relief was the only real success from last year’s bailout talks, after all.

Paul Mason, the former Channel 4 News economics editor, has written about the Greek crisis for the Guardian tonight.

He argues that the call for Greek debt relief is part of a larger transformation in Europe:

So, now it’s no longer about austerity: there is a three-way battle for the soul of Europe; between a beleaguered centre that’s seeing its consent to govern drain away; a resurgent nationalist and racist right; and a modernised radical left. The Greek request for debt relief poses to the European centre the question: which side are you on?

Amid this, the resurgent radical left faces tough decisions of its own. To understand why, we have to understand the source of its recent strength. Podemos came out of the millions-strong indignados movement in 2011; Syriza expanded during the “occupation of the squares” the same year. The 188,000 people who joined the Labour party during and after Corbyn’s campaign are not just trade unionists and old lefties; at their core are student activists who learned their politics during occupation movement of 2010/11, and hordes of returning Greens. Sinn Fein’s transformation and growth in Ireland is likewise driven by a grassroots protest movement against water charges....

Here’s the full piece:

The Greek finance ministry has issued an upbeat statement, saying that further austerity measures will not be required following today’s meeting:

Greek prime minister Alexis Tsipras should be hot-footing it to the presidential palace within 30 minutes:

Euclid Tsakalotos concludes his press conference by saying he expects the IMF to come on board and support this deal. And all sides are confident that Greece can achieve its targets, meaning contingency measures may never be needed.

This is one reason the Greek side are happy tonight:

The Greek government did succeed in passing pension reforms, and income tax changes, last night - but it could have faced a revolt if it asked for more detailed austerity.

The IMF was pleased that debt relief was discussed today, says Tsakalotos, although obviously it wants more debt relief for Greece than some countries.

Euclid Tsakalotos is now outlining the new plan for contingency measures (extra austerity, if needed)

If Greece misses its targets, then a presidential decree would enforce ‘across the line’ cuts, he says. The government could subsequently implement some different measures in a budget.

We think this is legally binding, and will address creditors concerns.

Tsakalotos: Great relief to start debt relief talks

Euclid Tsakalotos says there was a “very interesting exchange of views” on the issue of Greek debt relief today.

Ministers didn’t agree on everything, but there was a commitment to tackle the issue.

He also supports the ‘three-layer’ approach, to tackle Greek debt relief on a short, medium and long-term basis (see earlier).

It’s a “great relief” to finally have this meeting on debt relief and talk about the specifics, to help Greece finally turn the corner.

Our expectation is that by 24 May we’ll have an agreement on fine-tuning the contingency measures, and we may also have agreement on debt relief too.

Greece, and our creditors, both need to feel that we are turning the page and that the vicious circle of measures leading to recession, leading to new measures, is over, Tsakalotos says.

Once we have the green light from creditors, it will give much-needed confidence to businesses, investors and consumers.

Tsakalotos says that Greece is relieved that its contingency measures is being used as the basis for discussions.

Euclid Tsakaloto
Euclid Tsakalotos Photograph: Eurogroup

Updated

Greek finance minister: This was a very good eurogroup

Hang on.... Euclid Tsakalotos, Greece’s finance minister, is giving a press conference now.

He being by telling reporters that

This was a very good eurogroup for Greece, and I think a very good eurogroup for Europe.

He thanks Jeroen Dijsselblom for acting as an ‘honest broker’ in the build-up to this meeting.

We have agreed a package of measure of fiscal measures, and structural reforms. And once they are legislated, funds will be dispensed to Greece.

Q: What happens if Greece does not legislate for extra contingency measures? And has the eurogroup made a big mistake by adding it at all?

No, it was a clever idea to bridge the difference between the eurogroup and IMF forecasts, Dijsselbloem replies to the second question. We need an insurance in case the pessimists (at the IMF) are right.

And on the first point, Dijsselbloem says the eurogroup has recognised Greece’s concerns about voting through extra austerity that might or might not be needed

We will not make the Greeks legislate specific measures up front, he says. We will make them legislate the mechanism, so it’s clear what happens if the programme goes off course.

And that’s the end of the press conference. I’ll do a summary now....

Q: Do we need an agreement on the whole package, including debt relief, before the next tranche of aid is paid out?

No, it’s not necessary formally, or politically necessary either, says eurogroup chair Jeroen Dijsselbloem.

As long as we’re comfortable that the IMF are going to ‘come on board’ and support the package, we could simply move to the disbursement, he adds.

Finland’s Alex Stubb has tweeted that he’s ‘carefully optimistic’ that there will be a deal by the next meeting on 24 May.

The IMF is “less optimistic, or more conservative if you will” about how Greece’s economy will perform by 2018, Jeroen Dijsselbloem says.

Thus, the extra contingency measures are needed, in case the Fund are right.

The IMF agreed and supported our approach at today’s meeting, Dijsselbloem adds.

Eurogroup: We need the IMF on board

Q: Are you ready to go ahead with the programme without the IMF (as Slovakia’s finance minister suggested earlier)

No, it’s not a possibility for the eurogroup as a whole, Dijsselbloem insists.

Several members cherish the involvement of the IMF, he adds [such as Germany, of course].

Updated

Eurogroup: We've beefed up Greece's contingency plan

Q: What have you changed to Greece’s proposal for contingency measures in case it misses its fiscal targets?

We have accepted Greece’s proposal, but with a couple of new conditions to enforce it, Dijsselbloem says. They are

1) They will initially consist of “Expenditure measures across the board, discretionary and non-discretionary”. Ie, Greece would have to slash spending.

2) Greece could then adjust the measures in a subsequent budget, to add revenue elements (to replace some expenditure cuts). That could make it more balanced.

3) The package must be agreed with creditors first. “It would be unfortunate if Greece implemented contingency measures and then the eurogroup said it wasn’t good enough.”

Updated

Today’s meeting was about opening the debate on Greek debt sustainability and considering the options, Jeroen Dijsselbloem continues, and also deciding what officials should start to work on.

Some instant reaction:

Onto questions.....

Q: You are only proposing long-term debt relief for Greece after 2018, if Greece hits its commitments. Will that really satisfy the IMF?

It depends what is agreed by May 24, says Dijsselbloem.

It is fair to assume that there will be debt sustainability with Greece, he continues, so it’s likely that it will need extra help at the end of the current bailout package in 2018.

Klaus Regling
Klaus Regling Photograph: Eurogroup

Updated

Now Klaus Regling, who runs the eurozone bailout fund (the EFSF), is speaking, and confirms that Greek debt relief talks began today.

The liquidity situation in Greece is getting tighter, he warns, and important debt repayments are coming up (Athens owes €3.5bn in July).

Regling also points out that Greece did get a big debt writedown in 2012, when private creditors took a haircut that saved Athens billions in debt repayments each year.

Commissioner Pierre Moscovici is now speaking.

He says that ensuring the sustainability of Greece’s debt is a “fundamental element” of the agreement reached last summer.

Dijsselbloem’s decision to consider Greeces’s debt relief on a short-term, medium-term and long-term basis is “very wise”.

Today is work in progress, but work in good progress, he concludes.

The Eurogroup’s aim is to make Greece’s debts sustainable in the long term, Jeroen Dijsselbloem adds.

Jeroen Dijsselbloem
Jeroen Dijsselbloem Photograph: Eurogroup

Eurogroup holds first talks on Greek debt relief

Dijsselbloem turns to debt relief.

Today’s eurogroup meeting held a “first round” of talks about Greek debt relief, he says.

They are now looking at Greece’s annual gross financing needs, rather than the debt/GDP measure.

And they considered Greece’s short-term, medium-term and long-term debt sustainability, he says.

In the short term, they are looking at ways of optimising Greece’s debt to lower repayment costs.

In the medium term, the eurozone working group has been asked to look at measures which could take place in 2018, at the end of the current programme. They could lower Greece’s debt costs, by lowering interest rate costs or changing repayment dates.

For the long term, the eurogroup stands ready, if necessary and if Greece is compliant with its targets, to consider whether further debt relief is needed.

The Eurogroup press conference
The Eurogroup press conference Photograph: Eurogroup

On the contingency measures, Dijsselbloem says the eurogroup took the last proposal from the Greek government and ‘enforced it’ – or amended it – to make sure revenues can be recovered if Athens fails to achieve its fiscal targets.

Those measures will be “legislated upfront” and kick in automatically, Dijsselbloem says.

  • That may means the Greek parliament has to vote these measure through, which could be a challenge...

8pm update: a presidential decree will be used, so there shouldn’t be a revolt in parliament

Updated

Eurogroup press conference begins

The press conference is starting now....

Jeroen Dijsselbloem says the eurogroup discussed three things

  • the policy package which has been drawn up, following last summer’s bailout deal
  • the contingency mechanisms in case Greece veers off course
  • A first-round discussion on debt sustainability.

He says the eurogroup welcomed the Greek policy package, which should pave the way for the (long-awaited) successful completion of its first bailout review.

Updated

The next two weeks could be quite tense as Greece and her creditors try to carve up a staff level agreement.

Slovakia’s Peter Kažimír says today’s meeting was much better than he had expected:

That’s not *quite* the same as saying it actually went well.....

EC vice-president: No deal today

EC vice-president Valdis Dombrovskis is tweeting that the meeting has ended.

He says eurogroup ministers welcomed the package of measures which Greece has agreed.

But he also says discussions will continue on May 24th, at the next scheduled eurogroup meeting.

Updated

The eurogroup meeting on Greece has ended, we hear, so the press conference should begin shortly.

Our economics editor, Larry Elliott, warns that Greece could be driven into default unless its creditors compromise.

He writes:

This was a situation only narrowly averted last summer and on his way into Monday’s meeting, Austria’s finance minister, Hans Jörg Schelling, said: “I don’t think anyone wants a repeat of summer 2015.”

Schelling spoke for many, including David Cameron, who could certainly do with Greece being out of the headlines for the next six weeks. Britain’s referendum means that the eurozone has to act with unaccustomed speed and sort Greece out within a fortnight. Otherwise the issue will be parked until after June 23 and another long, hot summer will loom large.

More here:

The Greek government will face serious criticism back home unless it gets a substantial deal on debt relief soon.

Blanka Kolenikova, senior analyst at IHS Country Risk, says it could even collapse:

The government’s public support will depend on progress on debt relief, which IHS maintains will take the form of extended maturities and fixing/lowering the interest rates applied to official loans. The SYRIZA-led government had campaigned strongly on an anti-austerity platform before assuming power in 2015. Achieving some degree of debt relief therefore represents a crucial life line for the administration, especially given the cost-cutting measures it has been forced to pass.

Failed debt negotiations could trigger further and more violent protests (violence has so far been caused primarily by anarchist groups). Significantly increased civil disorder would put pressure on the leftist government to resign. An early election would not favour SYRIZA and would risk a political stalemate, without any party able to form a stable majority government. In turn, this would reduce Greece’s ability to pass bailout-related measures and threaten its ability to secure future releases of official funding.

Last night, riot policemen on the streets during anti-austerity protests.
Last night, riot policemen on the streets during anti-austerity protests. Photograph: Pacific Pres/REX/Shutterstock

The Wall Street Journal has seen the Greek debt sustainability analysis drawn up by Greece’s creditors, which is on the table in Brussels today.

It shows remarkable uncertainty over Greece’s ability to reduce its debt pile.

One estimate shows Athens’ borrowing spiralling out of control over the next 45 years; another shows it being steadily eroded.

The WSJ says:

Greece’s debt may rise to as much as 258.3% of gross domestic product by 2060 or fall to as low as 62.6% of GDP, according to an official analysis of the country’s debt trajectory, a wide divergence that indicates difficult discussions ahead on the possibility of debt relief.

More here: Official Analysis Suggests Tough Talks Over Greek Debt Relief

Updated

Jeroen Dijsselbloem ringing the bell to open today’s EU eurogroup meeting.
Jeroen Dijsselbloem ringing the bell to open today’s EU eurogroup meeting. Photograph: Geert Vanden Wijngaert/AP

Eurogroup meeting: a quick recap

Hopes of a breakthrough deal between Greece and creditors on debt relief have been dashed today, although in truth is never looked like (as we warned in the opening post).

Instead, May 24 has been inked in as the next in a long line of Greek deadlines. That gives the eurozone two weeks to achieve three things:

  • agree whether Greece has met the terms of its bailout, to unlock around €5bn in aid
  • settle on ‘contingency measures’ that would kick in if Greece fails to hit bailout targets
  • find a mutually agreeable way to make Greece’s debt pile, worth 180% of GDP, more sustainable.

Eurozone ministers are now hunkered down in Brussels, considering whether the austerity measures agreed by Greece’s MPs last night are enough.

Some key players sounded relatively optimistic, such as commissioner Pierre Moscovici:

Others, such as Finland’s Alex Stubb and Germany’s Wolfgang Schäuble, may still need convincing that Greece has done enough.

And eurogroup president Jeroen Dijsselbloem says that while debt relief is on the agenda, there won’t be any firm conclusions today.

A press conference is scheduled for this evening, at perhaps 6pm or 7pm Brussels time (5pm or 6pm BST).

Updated

Photos: Inside the eurogroup

Europe’s finance chiefs are now gathered inside the EU council building to discuss Greece’s bailout programme.

These photos have just arrived, showing ministers in good spirits:

Euclid Tsakalotos, Jeroen DijsselbloemDutch Finance Minister and chair of the eurogroup finance ministers Jeroen Dijsselbloem, right, smiles as he greets Greece’s Finance Minister Euclid Tsakalotos during an EU eurogroup meeting at the EU Council building in Brussels on Monday May 9, 2016. European finance ministers gathered in Brussels Monday for talks aimed at breaking the deadlock over whether to provide more aid to bolster Greece’s shattered economy and forgive some of its debts. (AP Photo/Geert Vanden Wijngaert)
Greece’s Euclid Tsakalotos shaking hands with eurogroup chair Jeroen Dijsselbloem. Photograph: Geert Vanden Wijngaert/AP
Tsakalotos then chatted with Spain’s Luis de Guindos.
Tsakalotos then chatted with Spain’s Luis de Guindos. Photograph: John Thys/AFP/Getty Images
EU Commissioner Pierre Moscovici, a long-time Greek ally, also chatted with Tsakalotos
EU Commissioner Pierre Moscovici, a long-time Greek ally, also chatted with Tsakalotos Photograph: John Thys/AFP/Getty Images
German’s Wolfgang Schaeuble (left) conferred with Belgian’s Johan Van Overtveldt.
While across the room, German’s Wolfgang Schäuble (left) conferred with Belgian’s Johan Van Overtveldt. Photograph: Olivier Hoslet/EPA
Wolfgang Schäuble
Schäuble then checked the paperwork for today’s meeitng Photograph: Olivier Hoslet/EPA

Here’s the Slovakian position:

This may not be very practical. The financial markets might be alarmed if the IMF dropped out of the Greek bailout, and the German parliament would probably be furious.

Updated

Irish finance minister Michael Noonan says his country still opposes cutting Greece’s debt pile.

Instead, Ireland favours giving Greece debt relief by extending the repayment dates and cutting interest rates.

Noonan adds that he expects progress, but no deal today. Instead, he points to next meeting on May 24th.

Finland’s Alex Stubb is also playing down expectations for today’s meeting:

Germany’s finance minister is also defending Greece’s three bailout programmes:

Schauble forgot to mention that much of the money went to those who held Greek debt, helping German banks to stay on their feet....

Austria’s finance minister, Hans Jörg Schelling, speaks for us all:

Austria certainly doesn’t want another Greek crisis; it’s already reeling from the shock resignation of chancellor Werner Faymann this morning (see earlier post)

German finance minister Wolfgang Schauble today
German finance minister Wolfgang Schauble today Photograph: EbS

May 24th has just been inked in as the next deadline in the Greek debt saga.

Germany’s finance minister, Wolfgang Schäuble, has just told reporters that he hopes to make progress today, but no financial decision.

Updated

Eurogroup president Jeroen Dijsselbloem says that he hope to reach an agreement with Greece by May 24, when ministers hold their next scheduled meting.

Dijsselbloem: Don't expect any conclusions on Greek debt relief today

Eurogroup president Jeroen Dijsselbloem has just warned that a final decision on Greek’s bailout, and debt relief, is not likely today.

He just arrived at the eurogroup meeting in Brussels, and spoke to reporters.

Q: What are the prospects for Greek debt relief to be on the table today?

We’re definitely going to discuss it.

We’ll discuss when, if, under what conditions this could take place. Is it necessary?

But this is the first discussion. i don’t expect any definite conclusions on it yet.

Dijsselbloem also warned that ministers need more time to consider Greece’s reforms, and its proposals for contingency measures:

Updated

Italy’s finance minister, Pier Carlo Padoan, says ministers will not consider cutting the face value of Greece’s debts:

(as explained earlier, they could ease Athens burden in other ways)

Pierre Moscovici also denies that the eurogroup is backtracking on its commitment to debt relief.

With progress made on reforms and the contingency measures, attention can now turn to debt, he says.

Moscovici: Hoping to set framework for a Greek deal

Pierre Moscovici today
Pierre Moscovici today Photograph: EbS

European commissioner Pierre Moscovici has just arrived at the eurogroup meeting (for the second time - he must have sneaked out and in again).

He is telling reporters that the EC believes Greece has achieved a lot. The pension reforms and income tax reforms voted yesterday are “very important steps”, says Moscovici.

“We should today recognise that this effort has have been taken....

It represents a very strong amount of measures - and with that, Greece will be on this way to recover growth.”

Moscovici adds that “we’re on the right path” in talks about the extra contingency measures which lenders are demanding.

He also admits that the issue of debt relied is “a question mostly for the member states.”

B he’s still hopeful, declaring:

I hopes today that we will set the framework for a global deal, a demanding deal. That’s what the commission believes, and we believe it’s possible.

Updated

Spanish Minister of Economy, Luis de Guindos, today
Spanish Minister of Economy, Luis de Guindos, today Photograph: Olivier Hoslet/EPA

Spain’s man in Brussels today, Luis de Guindos, says he’s optimistic of a deal between Greece and creditors soon:

You can watch the arrivals in Brussels on the EbS service, here:

LIVE Eurogroup meeting Arrivals

Slovakia’s finance minister, Peter Kažimír, tweets that he expects a ‘debate’ on Greece’s progress.

He was one of Athens’ toughest critics during last year’s bailout dramas.

German government spokesman Steffen Seibert has tried to pour cold water on hopes of a Greek debt relief deal today.

Nothing can be discussed until Greece has proved that its economic reforms are satisfactory, Seibert told a press conference this morning. More here

Eurogroup gets ready to discuss Greek debt relief

Italian Finance Minister, Pier Carlo Padoan arriving for today’s eurogroup meeting.
Italian Finance Minister, Pier Carlo Padoan arriving for today’s eurogroup meeting. Photograph: Olivier Hoslet/EPA

Back in Brussels, officials are getting ready for ready for talks on how to make Greece’s debts more sustainable.

Options on the table could include lowering the interest rate on Greek bonds, or “reprofiling” them to give Athens more time to repay.

Here’s Reuters latest:

Euro zone finance ministers will start talks on Monday on how to reprofile Greek debt to make future annual servicing costs manageable for Athens despite opposition from Germany, which does not believe any relief isneeded, euro zone officials said.

The International Monetary Fund believes that Athens must get debt relief for its economy to develop and wants the discussions to focus on capping Greece’s annual debt servicing costs at around 15% of GDP or less.

Germany believes Greece can do without debt relief for now,especially that it does not have to service its debt until after 2022, when a 10-year grace period expires.

This sudden political crisis in Austria threatens to overshadow today’s Eurogroup meeting.

Perhaps it might also encourage eurozone finance ministers to make some progress on Greece, to show populist voices that Europe can work.....

Updated

More breaking news: Austria’s leader, chancellor Werner Faymann, has just resigned.

Faymann had been under pressures from his party, the centre-left social democrats, to work with the far-right Freedom Party.

The Freedom Party, which is anti-Islam and eurosceptic, is in a strong position to win the Austrian presidency in a ballot later this month.

This appears to have triggered another bout of political instability in Europe....

A German flag.

Newsflash: The International Monetary Fund is urging Germany speed up its public infrastructure spending, and get more refugees into work.

In its latest assessment of the German economy, the IMF says:

More progress on structural reforms would revitalize potential growth and enhance the authorities’ leadership at the European level in this area.

A more dynamic Germany would also benefit the still fragile economic recovery in the euro area.

The IMF also warns that economic growth will remain moderate. Strong domestic demand will offset weak external demand, meaning Germany will continue to run a near-record current account surplus.

Here’s the IMF’s ‘key policy messages’ to Berlin:

  • Accelerate structural reforms to boost growth potential by broadening the labor market participation of refugees, women, and older workers, and spurring competition in the services sector.
  • Step up public and private investment to meet infrastructure needs, while tackling administrative bottlenecks.
  • Remove impediments to housing supply expansion to better relieve the pressure on the housing market.
  • Develop the legal basis for real-estate-related macroprudential tools to better contain potential future excesses.
  • Improve financial sector oversight and macroprudential policy analysis by enhancing data collection.
  • Implement measures to strengthen the oversight role of banks’ supervisory boards by increasing their responsibilities and tightening member qualifications standards.
  • Together with the European competent authorities, complete the new bank resolution and crisis management agenda, as Germany is home to globally systemic institutions.

Updated

Today’s meeting could be fiery, predicts John Springford of the Centre for European Reform.

The problem is that the IMF is insisting on debt relief and lower fiscal targets for Greece, otherwise it walks away.

Germany isn’t convinced that either are needed, but is also adamant that the IMF must be involved in the Greek programmes.

We can usually rely on Pierre Moscovici, the European Commissioner for monetary union, for some upbeat quotes.

Not today, though. Moscovici has arrived at the eurogroup meeting without speaking to the press.

France’s finance minister, Michel Sapin, has arrived early for today’s meeting. He sounds pretty upbeat:

What would “the best” be? Well, agreement on the contingency measures, releasing the next bailout tranche, and starting to talk about debt relief would cover it.....

Update: Sapin even gave reporters a cheery wave:

French finance minister arriving for today’s Eurogroup meeting.
French finance minister arriving for today’s Eurogroup meeting. Photograph: Olivier Hoslet/EPA

Updated

German vice-chancellor urges Greek debt relief talks

German Economy Minister and Vice Chancellor Sigmar Gabriel.
German Economy Minister and Vice Chancellor Sigmar Gabriel, in Berlin this morning Photograph: Markus Schreiber/AP

German vice chancellor Sigmar Gabriel has urged eurozone finance ministers to start talks about Greek debt relief today.

Gabriel, who is the deputy leader of the Social Democrat Party (junior coalition partners), warned that Greece’s economy cannot take further austerity.

In a speech in Berlin this morning, he declared:

“We must help the country to reduce its debt burden.....

That’s why a step must finally be made at today’s Eurogroup meeting in Brussels to move towards a situation where Greece doesn’t have to fight every year again to get new loans in order to repay old loans.”

It’s an timely intervention from Gabriel, which also highlights the split with the German government over Greece. Finance minister Wolfgang Schauble has argued that Greece’s huge borrowing pile is currently sustainable, meaning debt relief is not required.

And those tensions could make it harder to get a deal today, warns Alex White of the Economist Intelligence Unit:

Greek officials: We've done our bit.

Officials at the Greek finance ministry are insisting this morning that an agreement in principle has been reached on the core €5.4bn package of measures demanded by lenders.

One said:

“There is an agreement in principle [concerning] the contents of the review: the privatisations fund, Non Performing Loans, social security and tax [systems], indirect taxes”.

Greece’s counter proposal to institute an automatic mechanism that would trigger across the board cuts in the event of finances veering of course – rather than extra contingency measures that would never get parliamentary approval - will be discussed in Brussels at a euro working group this morning, the ministry said.

Analysts in Athens say the automatic brake is crucial if the once vehemently anti-austerity leftist-led government is to be able to return triumphantly from today’s crunch meeting.

“The irony is that this government has already put it name to very tough measures,” the veteran politics watcher Christos Memis told me.

“The protracted negotiations have been all about proving they are not traitors of the left. It is crucial that they now win this battle over extra [contingency] measures …. If not, they will probably do something out of the box like early elections.”

Finland’s finance minister, Alex Stubb, is on his way to today’s eurogroup meeting.

Greek government bonds boosted by austerity vote

Greek bonds are rallying this morning, as traders welcome the news that MPs approved fresh austerity measures overnight.

Money is flowing back into Greece’s debt, pushing down the interest rate (or yield) that investors demand to hold the bonds. The yield on two-year Greek debt has fallen sharply to 9.4%, down from 10.2% on Friday.

Greek two-year bond yields (where lower = safer)
Greek two-year bond yields (where lower = safer) Photograph: Thomson Reuters

That still shows a significant risk of default, though -- many shorter-dated eurozone bonds actually trade with a negative yield today.

Greece’s 10-year bonds, the benchmark of financial health, are also rallying. Their yield has fallen to 8.4%, down from 8.6%, which looks like a four-month low.

Patrick Jacq, European rate strategist at BNP Paribas, says the drop in Greek yields is a good sign:

“The vote in parliament is constructive and positive for the Eurogroup talks and that should help the decision to give Greece additional support,” said

(thanks to Reuters for the quote)

Updated

This pie chart, from Bloomberg, shows how the IMF and European institutions now hold most of Greece’s debt:

Robin Bew of the Economist Intelligence Unit also predicts trouble ahead:

Analyst: New elections in Greece soon?

Greece could soon be plunged into the uncertainty of another general election, fears analyst Wolfgang Piccoli of Teneo Intelligence.

He’s worried that the two sides still haven’t reached a decision on ‘contingency measures’ (fresh austerity) that would be implemented if Greece failed to hit the targets set by creditors.

While Athens insists on an automatic fiscal brake that would trigger across-the-board cuts, the institutions, and especially the IMF, consider this option neither credible nor sustainable. In contrast, they are calling for specific measures that should be legislated upfront and have an automatic trigger. While Tsipras’ preference is to conclude the review as soon as possible, the nature of the contingency package could determine the fate of his government as it would be very difficult, if not impossible, to secure the required 151 votes. Conversely, Germany will be unwilling to discuss debt relief any further without a specific Greek contingency package with automatic triggers.

Teneo reckons there’s a 65% chance that a deal will be reached. But....

The risk of snap polls could increase significantly if the lenders decide to play hardball by insisting on a contingency package that Tsipras cannot either accept or get approved in parliament. The Eurogroup meeting scheduled for 24 May could offer the next opportunity for a deal.

UKIP leader Nigel Farage has leapt on the protests in Athens last night, as proof that Britain should quit the EU:

It’s worth noting that while thousands of people protested in Athens, the violence appeared to be restricted to a group of youths throwing flares and Molotov cocktails at officers who responded with volleys of tear gas.

TOPSHOT - Greek police stand guard amid molotov cocktails thrown by protesters during in an demonstration against reform package in Athens on May 8, 2016.

Here’s our latest dispatch from Athens:

Greek debt crisis: What the papers say

Greek Prime Minister Alexis Tsipras in the Athens parliament last night.
Greek Prime Minister Alexis Tsipras in the Athens parliament last night. Photograph: Angelos Tzortzinis/AFP/Getty Images

The Greek crisis is returning to centre stage on today, says Bloomberg.

Aid deliberations by its international creditors will signal whether the country faces a renewed period of political drift or wins some economic breathing space after six years of turbulence.

Bloomberg: Greece Fights to Unlock Aid as Impasse Risks Political Unrest

The Wall Street Journal says that the pension and tax measures agreed last night match the bulk of the austerity demanded by lenders.

However....

Greece’s most influential creditors, Germany and the International Monetary Fund, remain deadlocked over the terms of Greece’s bailout plan, which the IMF thinks is badly flawed but Germany says can’t be changed.

The Eurogroup, as the committee of eurozone finance ministers is known, will meet in Brussels on Monday to discuss Greece’s fiscal strategy and the sustainability of its debts. A resolution of the deep differences isn’t expected.

WSJ: Greece Passes Austerity Measures as Creditors Remain Deadlocked Over Bailout Terms

The Financial Times warns that IMF and Germany are still demanding extra austerity in case Greece’s bailout goes off course -- but are opposed by the Greek side, and the European Commission.

Eurozone officials said that the stalemate over the contingency measures made it unlikely that any agreement to close the first review will be reached at Monday’s meeting.

Greece needs the additional bailout aid by July, when €3.5bn in debt comes due. The Greek government has sought to blame the IMF for the delays, and a senior Greek official said on Sunday that both the commission and the European Central Bank believed that Athens had done enough to close the review.

“There are some measures that still have to be adopted but the Europeans now appear to be satisfied,” the official said.

FT: Greece approves pension and income tax reforms

Updated

Recap: MPs approve austerity measures despite protests

Minor scale clashes took place during protests in Athens last night.
Minor scale clashes took place during protests in Athens last night. Photograph: Kostas/Pacific/Barcroft

There were familiar scenes in Athens last night as MPs gathered to vote on a €5.4bn package of budget cuts and pension reforms.

Thousands of demonstrators flocked to the Greek capital to protest against the austerity piled on the country, at the end of a three-day general strike.

It turned violent at one stage, with riot police using tear gas after a group of masked demonstrators threw rocks and petrol bombs.

There was drama inside the parliament too, with opposition leader Kyriakos Mitsotakis laying into prime minister Tsipras over his handling of the crisis.

Crisis watcher Iliana Magra live-tweeted the whole thing here:

Tsipras, though, insisted that Greece was making progress, saying:

We have an important opportunity before us for the country to break this vicious cycle, and enter a virtuous cycle.

And the PM also argued that Monday will be a “very important day”, because:

After six years (of crisis), the Eurogroup will meet to discuss debt relief.

Despite predictions of defections, Tsipras’s coalition stuck together and approved the package, including a lower income-tax threshold.

Updated

The agenda: A Greek eurogroup meeting!

Good morning.

The long-running, seemingly never-ending Greek debt crisis is back on the agenda.

Finance ministers from across the eurogroup will gather in Brussels this afternoon, hoping to make two important moves.

  1. They could finally complete the long-stalled first review of Greece’s massive EU-IMF bailout (the one agreed last July)
  2. They could start talking about debt relief measures for Greece.

The talks could be productive (at least by EU standards), as the Greek parliament has just agreed a new package of tough austerity measures overnight.

That vote should pave the way to unlock the next tranche of bailout aid for Greece. That would be welcome, following months of deadlock between Athens and creditors over €3.5bn of extra “contingency measures” demanded in case Greece fails to hit its budget targets.

There won’t be a major decision on debt relief today, of course.

Officially, the eurogroup’s plan is to “discuss possible debt relief measures aiming at ensuring that Greece’s gross financing needs remain at a sustainable level, with a view to reach a political agreement.”

But it is still an important meeting. Last Friday, the International Monetary Fund urged the eurozone to begin debt relief negotiations right away, and to recognise that the fiscal targets set for Greece last summer are simply unachievable.

Otherwise, the IMF could possibly walk away from the whole adventure....

Eurozone ministers should gather in Brussels around 3pm local time (2pm BST), followed by an early-evening press conference.

We’ll track all the main events through the day....

Updated

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