Tsipras returns from Russia empty handed with Greek cash depleting

When his plane touches back down in Athens, Greek Prime Minister Alexis Tsipras will be quickly reacquainted with reality.

Talks with Russian President Vladimir Putin in Moscow on Wednesday focused on a proposed energy pipeline, future investments and sanctions over the conflict in Ukraine, a meeting that had been dismissed before it began by Germany and France as a sideshow. With a payment to the International Monetary Fund on Thursday depleting Greek cash reserves still further, it’s back to haggling with creditors in the euro region over a financial lifeline.

“There’s been a big fuss over this trip without immediate economic benefits,” said Dimitris Sotiropoulos, an associate professor of political science at the University of Athens. “Now he needs to do something quickly. There’s an unbalanced negotiation now, where the Greek side is prepared on some issues and completely unprepared on others.”

With a monthly bill of about 1.5 billion euros ($1.6 billion) for pensions and salaries, Greek officials this week said they are targeting an April 24 meeting of euro-area finance ministers as a deadline for approving new money. A looming cash crunch in the summer, when the European Central Bank needs to be repaid, means any respite would be temporary.

A meeting of the currency region’s representatives late on Wednesday piled more pressure on the Greek government to start negotiating in earnest if it is serious about obtaining liquidity, according to two European Union officials.

European Commission spokesman Margaritis Schinas said earlier Wednesday that there was “progress step by step.” Discussions will continue during the Orthodox Easter weekend in Greece, he said. Even so, with many finance chiefs attending IMF meetings in Washington next week, time is running out for Greece to meet its self-imposed target.

ECB Money

The negotiations are focused on honing an initial agreement reached in February over reforms including such things as tax collection and maintaining sales of state-owned companies.

“We are ready to accelerate those negotiations but we also need to see progress on the Greek side,” European Commission Vice President Valdis Dombrovskis said in an interview in Bucharest. “In recent weeks we are seeing some change of attitude from the Greek government’s side and they are becoming more serious in terms of actually implementing the program commitment, but there is still lots of work to do.”

Greece’s goal is to unlock about 7 billion euros of aid from its existing program before likely having to conclude another one to be able to repay the ECB for bonds it bought under a program to prop up local debt markets.

Breathing Space

Greek banks, which have lost about 28 billion euros in deposits since October, will be looking for more breathing space from the ECB. The Governing Council is scheduled to hold a telephone conference on Thursday to assess the size of emergency-liquidity assistance provided by the Greek central bank, according to two people familiar with the matter.

Since Greek lenders lost access to normal ECB funding lines in February, policy makers raised ELA every week. On April 1, they increased the available amount by 700 million euros to just under 72 billion euros.

Tsipras’s visit to Russia, which concludes on Thursday, was aimed at enhancing Greece’s trade, its role as an energy hub and to look at boosting tourism, he said at a press conference with Putin. Russia was Greece’s biggest trading partner until volume fell by 40 percent last year, Putin said at the meeting.

It didn’t yield any promises of financial assistance or specific deals, though Greece said it hadn’t requested aid.

No Beggar

“Greece isn’t a beggar asking different countries to solve its financing problems for an economic crisis that doesn’t concern only Greece but is European,” Tsipras, 40, said in Moscow. “It’s not a Greek problem, it’s a European problem. To the European problem, a European solution will be found.”

The two leaders also signed a pact supporting the role of the United Nations in international affairs, and discussed ways to find peace in Ukraine.

While seeking routes to add impetus to their ailing economies, Putin is looking for an ally to undermine the European Union’s position on “the vicious circle of evil sanctions” against Russia over the Ukrainian conflict. A unanimous vote of the 28 member states is needed to renew the measures when they expire in July.

Tension Raised

While mainly rhetoric and promises of cooperation, the trip risked adding to the tension within the euro region over extending more aid to Greece.

On the eve of the visit, the government produced a bill for German reparations from World War II of about 280 billion euros, called a “dumb distraction” by Chancellor Angela Merkel’s deputy. Merkel and French President Francois Hollande also shrugged off the overtures to Russia as talks on Greece’s bailout stalled, according to government officials.

Norbert Roettgen, a lawmaker with Merkel’s Christian Democratic Union who is chairman of the parliamentary foreign affairs committee, said increasing dependence on Russia was Greece’s mistake to make.

After this month, Tsipras’s next step is to galvanize support at home after his Syriza government was elected in January on the promise of ending austerity while ensuring Greece remained in the common currency.

There needs to be domestic backing for another package in May or June, said Athanasios Vamvakidis, head of G-10 foreign exchange strategy at Bank of America Merrill Lynch.

“The most difficult thing is to approve this program in the parliament and how to fund Greece in the meantime, because they are running out of cash,” he said in an interview with Bloomberg Television. “What he really needs to bring back to Greece is a deal with Europe.”

Bloomberg