Germany, France Usher Greece Back to Negotiating Table

Lifestyle and Budget Reuters

European leaders told Greece on Friday to return to the negotiating table for "intensive work" to wrap up a reform agreement before cash runs out, sidestepping Athens' demand for a comprehensive, long-term solution to its troubles.

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With his country risking default in as little as two weeks, Greek Prime Minister Alexis Tsipras flew to Riga to press German Chancellor Angela Merkel and French President Francois Hollande for a political push to break the impasse in technical-level talks with European Union and International Monetary Fund creditors.

The leaders offered help, but told Tsipras to get back to focusing on talks with the so-called "Brussels Group" of European Commission, European Central Bank and IMF lenders - the trio bankrolling Greece since it nearly went bankrupt in 2010.

"It was a very friendly, constructive exchange, but it's also clear that there must be more work with the three institutions. There is a lot to do," Merkel told reporters on the sidelines of an EU summit in Riga.

She said France and Germany had offered to help whenever it was needed, but said: "The conclusion needs to be found with the three institutions and there needs to be very, very intensive work."

Acknowledging Greece's dire financial state as its cash runs dry, Hollande said the focus should be on a quick deal that allows the reopening of aid so Greece can be sure of making payments to the IMF in early June.

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"Everyone knows the deadline, because it'll be around June 6  or 7 that Greece will need liquidity to meet certain repayments," Hollande said. "That doesn't mean that other phases cannot be prepared but what interests the Chancellor and I is what responses Greece can make to release the funds which would give Greece the means to pay the amounts it owes in June."

Greece's government put a brave face on the outcome of the talks, voicing optimism it could reach a deal in as little as 10 days - before the next IMF payment falls due on June 5.

"We think conditions have matured for (talks) to progress further and in the next 10 days, in May, for the deal to be sealed," government spokesman Gabriel Sakellaridis told Skai TV, adding a deal would allow the European Central Bank to include Athens in its bond-buying programme.

Tsipras said he was "very optimistic" of soon reaching a "long-term, sustainable and viable solution without the mistakes of the past".

He later held talks with European Commission President Jean-Claude Juncker, who agreed a deal was "feasible" in the coming weeks, a Greek official said.

BUYING TIME

Since storming to power in January, Tsipras's leftist-led government has bitterly fought and then struggled through four-months of talks with the EU and IMF on a deal that could release up to 7.2 billion euros ($8.1 billion) in remaining aid.

The initial acrimony that marked talks with lenders - who were aghast at the new government's unabashed determination to end austerity and bailouts keeping Greece afloat - have largely abated. But the talks remain deadlocked over pensions, labour reform, fiscal targets and increases in value-added tax.

Athens has proposed VAT rates of 7, 14 and 22 percent in an effort to redistribute the tax impact and lighten the burden on lower income groups, the government spokesman said. But lenders want rates of 11 and 23 percent instead and are pressing for an increase in VAT on energy to 23 percent.

Complicating matters further is what Greek officials say is disagreement between the IMF and EU creditors over the priorities on Greece and the resistance of the IMF to agree a quick deal without a comprehensive review of reforms to be done.

Speaking in Rio de Janeiro, IMF chief Christine Lagarde agreed that a lot remained to be done for a deal and said: "It has to be a comprehensive approach, not a quick and dirty job."

Greek Finance Minister Yanis Varoufakis has said he believed the IMF did not want to be involved in Greece after the bailout expires in June. But in a sign that may be unlikely, Germany said it was essential for the IMF to take part in reform talks.

A Greek official said the country had "no problem" with the IMF's continued participation in talks.

Reflecting the growing exasperation within the euro zone over a country that has lurched from one crisis to the next over the past five years, Bundesbank chief Jens Weidmann told Reuters it was now up to Athens to stabilise the Greek economy.

Asked about calls from beyond Europe for other EU countries to help Greece and calm financial markets, Weidmann said: "This can't always simply be about simply buying Greece more time."

(By Renee Maltezou and Alastair Macdonald; Additional reporting by Alastair Macdonald, Adrian Croft in Riga, Jan Strupczewski in Brussels, Alonso Soto in Rio de Janeiro and Gernot Heller in Berlin, Writing by Deepa Babington Editing by Jeremy Gaunt)