Pressure Builds on Greece to Reach Deal as Deadline Creeps Closer

By Viktoria Dendrinou and Stelios Bouras 

        ATHENS--Greece and its creditors faced mounting pressure Friday to strike a deal on painful economic overhauls the country must undertake in exchange for a new bailout ahead of a looming debt repayment later this month.
        Technical experts from Greece and the institutions overseeing the country's bailout--representing the European Central Bank, the International Monetary Fund, the European Commission and the eurozone bailout fund--have been meeting in Athens over the past two weeks in an effort to flesh out the reforms needed to secure rescue aid worth up to EUR86 billion ($94 billion).
        But significant differences remain, and the clock is ticking. Greece needs the money to repay some EUR3.2 billion in maturing debt to the ECB on Aug. 20.
        "We are running as fast as we can in order for there to be a deal. Considerable progress has been made but there are some outstanding issues," said a Greek government official with knowledge of the negotiations.
        Senior officials from European Union finance ministries will hold a call later Friday to discuss progress on talks and examine whether a deal could be reached before the ECB deadline, or whether Greece might need some form of bridge financing to meet its debt obligations.
        Greek and European officials have signaled optimism over the past few days, with the Europeans pointing to a smoother process than the strained manner of the talks that led to a tentative deal on July 12.
        "We now have a relatively normal process of negotiations. It is clearly an improvement," said a European official.
        Late Thursday, Greek Prime Minister Alexis Tsipras met with French President Francois Hollande on the sidelines of the inauguration of the expanded Suez Canal in Egypt. They agreed that talks can be "completed straight after August 15," the Greek prime minister's office said.
        So far, the two sides have yet to agree on Greece's new fiscal targets and how the country will manage the sale of state-owned assets, according to two Greek officials.
        Last month's deal requires the formation of a fund to generate EUR50 billion from the sale of asset sales. Half of that would be used to repay money borrowed from the eurozone to recapitalize Greek banks, while a quarter would be used for investments and a quarter for reducing the government's debt burden.
        Negotiations are also focusing on how to restore the health of Greece's financial system, after its banks closed their doors for a month to stem deposits pouring out of lenders amid fears over the country's future in the eurozone.
        Their recapitalization is estimated to cost up to EUR25 billion, while banks struggle under the weight of growing nonperforming loans--those for which debtors have failed to make payments for more than 90 days.
        Greek banking stocks were hit hard earlier this week after the stock market reopened. On Friday, they recovered slightly, with the sector index up nearly 1% in mid-session trade on the Athens bourse.
        To meet the tight time frame, the Greek premier may next week order the opening of parliament--which is closed for summer--to rush through the reforms in a vote that is likely to pass with the help of main opposition parties.
        For Greece to receive the first tranche of aid, its parliament must first pass some of the so-called prior actions--a set of economic overhauls and budget cuts.
        After this, a meeting of eurozone finance ministers can be convened for governments and parliaments to authorize the new Greek bailout and allow for the disbursement of the first slice of aid, European officials say.
        If talks aren't concluded by then, Greece can meet its coming financial obligations by getting a bridge loan by the European Financial Stabilization Mechanism, an EU-wide bailout fund backed by the bloc's budget. Athens received another loan from the bailout fund in late July to repay maturing debt to the ECB and clear its arrears to the IMF.
        Write to Viktoria Dendrinou at viktoria.dendrinou@wsj.com and Stelios Bouras at stelios.bouras@wsj.com
        (END) Dow Jones Newswires

        August 07, 2015 10:17 ET (14:17 GMT)