Greece eyes bridge agreement next week, final deal on debt in Sept

Greece's new Left-led Finance Minister Yanis Varoufakis addresses the parliament in Athens, Feb 9, 2015. Varoufakis confirmed on Monday he would go to the Eurogroup of euro zone finance ministers with a request for a bridge agreement to tide Greece over until a new debt pact with international lenders could be sealed. [Photo/Agencies]

ATHENS - Greece's new Left-led government was putting the final touches on Monday on the package of proposals for the transitional period of the post-bailout era Finance Minister Yanis Varoufakis will present to Wednesday's extraordinary euro group meeting, according to Finance Ministry sources.

Athens does not expect a dramatic breakthrough this week, as international lenders continued to add pressure on the Radical Left SYRIZA administration to stick to the austerity and reform drive accepted by previous governments since 2010 under bailout agreements and to forget about the pre-election debt write off demands.

However, the new government, which was elected after the Jan.

25 elections, was confident that a bridge agreement could be reached in next week's Feb. 16 euro group meeting and a final deal on the resolution of the Greek debt load could follow in September, government sources said on Monday.

Optimism was based on the fact that the ideas put forward were realistic and far from radical, they stressed.

The draft deal the Greek side planned to present to euro group on Wednesday envisages a bridging agreement lasting until the end of August, instead of June as initially planned, which will be replaced by the final new deal on Sept. 1.

In order to overcome creditors' reactions who have clearly said that euro group does not do bridge agreements Athens implied that it would not object if creditors would call this bridging deal a "technical extension."

Regarding the financing means of Greece during this transitional period, Greek government sources said that Athens will insist on the release of the 1.9 billion euros ($2.15 billion) in profits from Greek bond holdings owned by the European Central Bank and the raising of the ceiling on the issuance of Treasury bills which currently stands at 15 billion euros by 8 billion euros.

The Greek government will also push for a more flexible Emergency Liquidity Assistance (ELA) mechanism to support the banking system and the use of the 11 billion euros reserves of the Hellenic Financial Stability Fund to tackle the pressing issue of the non-performing loans.

According to the draft package of proposals Varoufakis will present to Greece's interlocutors in coming days, government sources said, the top priority of the new administration remains the dealing with the humanitarian crisis. This is one of the unnegotiable topics for Greece, they underlined.

Athens would also not accept as unrealistic and suffocating for Greek society goals set for budget primary surpluses in 2015 and coming years.

The new government will propose a 1.5 percent of GDP primary surplus this year instead of 3 percent agreed by the previous conservative-led ruling coalition to give some breathing space to recession-hit households and enterprises and kick start the economy.

In regards to the structural reforms part, Varoufakis said speaking in the parliament on Monday ahead of the confidence vote scheduled for Tuesday night, that the new government embraced up to 70 percent of the reforms suggested by international creditors.

The rest of the reforms under bailout commitments which the SYRIZA-led administration rejects as "toxic" for the ailing economy, according to government sources, could be replaced by a set of 10 key pillars of reforms which will be promoted in cooperation with the Organisation for Economic Co-operation and Development (OECD).

As for the thorniest issue of the further debt relief, Athens, according to Greek Finance Ministry sources, will suggest instead of a new "haircut" of part of the debt burden a renegotiation based on a "swap menu".

Finally regarding the fate of the privatization program and investment policy framework, the finance ministry sources stressed that the new government will encourage the privatization of Piraeus port and other projects which will be to the benefit of national interests, but will thoroughly review privatizations which have not been completed.