No Greek deal is no big deal because it’s close, EU creditors say

But pressure on all participants to get it right next time has gone up significantly.

The Greek bailout talks once again ended without a conclusive agreement, but eurozone finance ministers shrugged it off, saying they are confident of a deal at their next meeting June 15.

The almost four-week buffer to the next Eurogroup meeting gives everyone some breathing space. But it’s clear the pressure on all participants to get it right by then has now gone up significantly.

“I think we’re very close to that agreement, but tonight we are unable to close a possible gap between what could be done and what some of us expected could be done,” said Jeroen Dijsselbloem, president of the Eurogroup, at a post-meeting press conference late Monday evening in Brussels.

The latest Eurogroup gathering had been billed as one that would have paved the way for more debt relief for Athens and allowing the International Monetary Fund to present its proposed participation in the program to its board — triggering the next round of bailout cash to Greece in its €86 billion rescue program. The Hellenic state faces a debt repayment in July that amounts to around €7.4 billion.

But omens turned bad for Greece a few hours before the discussions began, when Germany’s finance minister, Wolfgang Schäuble, dismissed calls from his cabinet colleague Sigmar Gabriel to give Greece further debt relief.

Other eurozone finance ministers arriving for the meeting in Brussels soon followed suit, with Belgium’s Johan Van Overtveldt cautioning “we should … consider all the consequences of an eventual debt relief.”

Without a consensus on the issue, the IMF will remain on the sideline even though some national parliaments like Germany’s have made the Washington-based institution’s participation a requirement for their government’s own role in the bailout.

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The IMF is unconvinced the Greek program will be sustainable if creditors don’t grant more generous debt relief, putting it at odds with Schäuble’s position. The fund, EU creditors and the European Commission also disagree on Greece’s economic growth forecasts, which are central to calculating the program’s overall debt sustainability.

The standoff persists despite Athens’ concession to trim government spending by an additional 2 percent of economic output through pension cuts and tax increases. Last week, the Greek parliament approved these reforms amid fierce public protests in a bid to help convince creditors it can achieve a primary surplus target of 3.5 percent of economic output next year and help maintain it for roughly five years thereafter.

The failure of the creditors to offer more debt relief in return could spark a political backlash in Greece, as policymakers in Athens may feel betrayed by their European partners.

“If the IMF does not [re-join] the [Greek bailout] program, and if we do not receive an adjustment of the Greek debt with detailed medium-term measures, then there is no reason to implement the [reform] measures,” said Dimitris Tzanakopoulos, a Greek government spokesman, last week ahead of the parliamentary vote.

The legislative action nonetheless received praise from Greece’s creditors as it allowed Athens to check off roughly 105 of its 140 reform commitments. “A lot of work has been done by the Greek government,” said Dijsselbloem.

Greece still has until mid-June to complete the remaining commitments, before the European Stability Mechanism (ESM) — the EU’s bailout arm — can sign off on the next tranche of bailout cash.

“At the ESM, we are ready to make full disbursements,” said Klaus Regling, its head. “There is some time left to do this, but not very much. We didn’t have a full agreement … but we are not starting from scratch here.”

For Greece, any delay in striking a deal may keep it in recession longer, making it increasingly difficult for the country to meet the creditors’ demands. The ongoing delays in bailout talks forced the Greek government to revise down its 2017 GDP forecast to 1.8 percent from 2.7 percent.

And even for Berlin, Athens’ biggest creditor, the failure to secure IMF participation would mean Chancellor Angela Merkel and Schäuble would presumably have to go back to the Bundestag for new approvals to fund the Greek rescue.

But that would be a big mess, especially since so much of the money has been paid out. If the IMF doesn’t join, the bailout’s critics would say (with some justification) that the loans were made under false pretenses. With Germany’s national election just a few months away, this is the last issue Merkel and Schäuble would want to be dealing with, especially since the biggest opponents of the bailouts come from their own camp.

After another near miss Monday night to close out the now one-year-long bailout talks, it fell on Greek Finance Minister Euclid Tsakalotos to lecture his country’s paymasters. “I’m quite confident that if all sides are in a mood to compromise, it should not be beyond the wit of man to find that compromise within three weeks,” he said.

Johanna Treeck and Matthew Karnitschnig contributed reporting.