Will Greece’s creditors abandon absurd surplus requirements?

24th April 2015 By: Ranko Berich

Although there were a few hints of progress, today’s Eurogroup meeting was ultimately a well executed no comment on the potential Grexit. The same non-answers were once again offered by Schauble and Djissenbloem, who refused to clarify the state of negotiations, or what the terms of a possible deal might be, while reminding everyone present that time is running out.

Reports of Greek finance minister Varoufakis getting ‘hammered’ by his creditors are beside the point, we already know that these negotiations have been antagonistic.

Ironically, the best hints as to what is actually going on behind the scenes in negotiations came from Mario Draghi, who initially declined to make a statement. When pressed by journalists, Draghi stated that a potential deal would have three building blocks: process, fiscal agreement, and structural reform.

Draghi seemed to hesitate when he spoke about fiscal agreement and this is because it is here where the crux of the problems lies. Greece is probably willing to negotiate on structural reform of its economy, but requires some relief of the utterly draconian fiscal surplus requirements that have been imposed on it.

There is a strong basis for an agreement where Greece makes structural reforms in exchange for easier fiscal targets that allow it to protect wages and pensions. The question now is this: are Greece’s creditors finally willing to abandon the frankly absurd surplus requirements they are insisting on, and provide a carrot next to the stick that Greece is currently being hammered with.