Greece’s creditors ready to compromise even as Athens warns it might skip IMF payment

Greece’s international creditors signaled on Wednesday they were ready to compromise to avert a default even as Athens warned it might skip an IMF loan repayment due this week.

Prime Minister Alexis Tsipras agreed in a telephone call with German Chancellor Angela Merkel and French President Francois Hollande on the need for an immediate solution to the long-running debt negotiations involving a lower primary budget surplus target for Greece, a Greek official said.

Their third call in a week took place shortly before Tsipras flew to Brussels to meet senior European officials and hear the terms of a plan drawn up by the European Commission, the European Central Bank and the International Monetary Fund after a meeting of leaders chaired by Merkel on Monday.

With time running out, and looking to draw a line under four months of acrimonious negotiations, the creditors have effectively come up with a take-it-or-leave-it offer.

However, Tsipras has produced a plan of his own and said he intended to discuss that document in Brussels, calling on euro zone partners to show some “realism” and urging a deal that would let Greece escape from “economic asphyxiation”.

Hardline German Finance Minister Wolfgang Schaeuble said an initial look at Greece’s reform suggestions indicated that talks aimed at securing an aid-for-reforms deal will take time.

“I have no information that anything decisive has changed in terms of substance,” he said at an event in Berlin.

Looking for a compromise, the creditors suggest that Greece should post a budget surplus before interest payments of one percent of gross domestic product this year and two percent in 2016, instead of 3 percent and 4.5 percent under the terms of the current plan, sources familiar with the proposal said.

The sources said the Greek government, elected in January pledging to end years of bitter austerity, had suggested a primary surplus of 0.8 percent this year and 1.5 percent next year.

However, the relatively small gap in headline numbers masks tougher unresolved issues on how to achieve the fiscal targets.

Athens has offered to curb early retirement to save on pension payouts but the lenders have been seeking cuts in supplementary pension benefits and an easing of private sector layoffs to make the economy more competitive.

It was also not clear if the creditors – euro zone governments, the IMF and the ECB – had shown any flexibility in those areas.