BERLIN (Reuters) - Global lenders’ negotiations with Greece, which have been moving at a crawl recently, have gained some momentum but remained a long way from the finish line, the International Monetary Fund’s European head told a German newspaper.
Athens has been stuck in negotiations with its euro zone partners and the IMF over economic reforms required by its lenders to unlock remaining bailout funds.
“There has been a little bit more impetus in the negotiations between the three institutions and the Greek government for several days,” business daily Handelsblatt on Monday quoted Poul Thomsen as saying, referring to the European Commission, the European Central Bank and the IMF.
“That’s a good development and gives us reason to hope,” said Thomsen, the director of the IMF’s European department and head of its program with Greece.
But he added that they remained “far from the target” and a lot more impetus was needed in the talks for an agreement to be reached in time.
Shut out of bond markets and running out of cash to meet debt repayments and pay civil servants and pensions, Athens may get more aid from both the IMF and euro zone governments if there is agreement on reforms to make its finances sustainable and the economy more competitive.
Thomsen said the Greek government’s finances would perhaps last until June: “The burden of repayments which are coming up for Greece is very big. We need to reach an agreement beforehand so that further assistance loans can be paid out.”
Greek Deputy Prime Minister Yannis Dragasakis told Sunday newspaper To Vima that Athens aims for a deal with its creditors over a reforms package but will not retreat from its red lines and did not rule out a referendum or early polls if talks reach an impasse.
Thomsen warned against underestimating the risks that would be associated with Greece leaving the euro zone: “Nobody should think that a Grexit would not be without problems.”
He added it was important to minimize longer-term risks such as “the danger that the euro zone is seen as a club that you join and leave as you please” as that could raise doubts about whether or not other states will remain members in future.
He said the single currency bloc needed to send “a very strong political signal” that it was integrating further to dissipate such risks, adding that it needed a stronger fiscal and political union in the longer term.
Reporting by Michelle Martin; Editing by Kim Coghill