May 27, 2015 / 2:33 PM / 2 years ago

EU officials dismiss Greek statement on aid agreement being drafted

Greek Finance Minister Yanis Varoufakis (L) welcomes Prime Minister Alexis Tsipras for a meeting at the ministry in Athens, Greece May 27, 2015.Alkis Konstantinidis

ATHENS (Reuters) - Greece's government on Wednesday said it is starting to draft an agreement with creditors that would pave the way for aid, but European officials quickly dismissed that as wishful thinking.

Greece and its European and International Monetary Fund lenders have been locked in tortuous negotiations on a reforms agreement for four months without a breakthrough in sight. Without a deal, Athens risks default or bankruptcy in weeks.

A new round of talks begin on Wednesday in Brussels, and a Greek government official said the two sides would start drafting a technical-level agreement there, along the lines of Athens' longtime demands for no wage or pension cuts and a lower target for a primary budget surplus.

But European Commission Vice President Valdis Dombrovskis said the two sides still had some way to go before any agreement could be drawn up.

"We are working very intensively to ensure a staff-level agreement," he said. "We are still not there yet."

Other officials in the euro zone, speaking to Reuters on condition of anonymity, were more blunt. One called the Greek remarks "nonsense". Another said: "I wish it were true."

Greek Deputy Foreign Minister Euclid Tsakalotos, who is also a top negotiator in talks with Athens’ lenders, told German newspaper Frankfurter Allgemeine Zeitung that both sides were not only discussing the terms for completing the current aid program, but that talks already included the conditions of additional aid.

“Almost by itself, the two negotiation processes have now been combined,” he said. Tsakalotos also said that the final decision on further aid for Greece and the country’s economic future would come in the next two weeks.

Another Greek official defended Wednesday's government statement, saying any draft being drawn up now would not be the final agreement, but that there had been progress in talks even though there had been no agreement on some issues.

The statements come as pressure grows on Greek Prime Minister Alexis Tsipras to strike a deal before the country faces a 300 million-euro payment to the IMF on June 5, which several government officials say Athens does not have money for.

Speaking to reporters after a meeting with ministers involved in negotiations with lenders, Tsipras once again voiced optimism that a deal was near. He blamed some of the trouble on policy differences between the EU and IMF creditors.

"We are in the final stretch, it's obvious that calmness and determination are needed," Tsipras told reporters.

"We are not alone in this, we are dealing with three different institutions which often have opposing views."

A deal has been held up by Tsipras's refusal to back down on so-called red lines, or non-negotiable demands, on reversing labor and pension reforms as well as agreeing a lower target for the primary budget surplus.

Additional reporting by Jan Strupczewski in Brussels and Renee Maltezou in Athens; Writing by Deepa Babington; Editing by Jeremy Gaunt, Larry King

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