Greece working on draft bill in hope of unlocking vitally needed bailout installment

ATHENS, Greece – Greece says it will discuss with its European creditors on Thursday a draft bill of reforms it hopes will earn their approval and pave the way for the unlocking of vitally needed bailout funds.

The dragging bailout talks with creditors, which have been going on for three months with minimal visible progress, have heightened concerns that Greece may be unable to strike a deal in time to avoid a debt default.

Moody’s ratings agency late Wednesday downgraded Greece’s creditworthiness by one notch to Caa2 — deep in junk bond territory — citing the uncertainty. It said the outlook on the rating is negative, meaning that another downgrade could follow.

Greece hopes the reforms in the draft bill will be sufficient for its creditors to approve the disbursement of the final 7.2 billion euro ($7.9 billion) installment of its 240 billion euro bailout.

The bill will be discussed with representatives of the International Monetary Fund, European Central Bank and European Commission in Brussels on Thursday, two government officials said. The Greek Cabinet is also due to discuss it in Athens.

“The aim of the negotiation at all levels is the achievement of a mutually beneficial agreement,” one official said Wednesday, speaking on condition of anonymity in accordance with government regulations. “The Greek government is optimistic that this will be achieved soon.”

But some of the more hard-line members of the governing radical left Syriza party have voiced objections at any deal that goes back on pre-election pledges to repeal all austerity measures that accompanied the bailout.

“Our government will not submit or surrender,” Energy Minister Panagiotis Lafazanis wrote in an article posted on the ministry website Wednesday. “If Berlin, Brussels and the IMF believe that they will either drag the country and our government to submission, or push us to collapse they are doubly wrong. Neither one nor the other will occur.”

Time is running out for a deal. Greece faces nearly 1 billion euros ($1.1 billion) in debt repayments to the IMF by May 12. It is expected to be able to meet the repayment as well as this month’s state pensions and salaries if it raises as much as it expects from a plan to use cash reserves from state enterprises.

But Greece will have trouble finding the money to keep the country running and pay off debts for much longer, as it is locked out of international borrowing markets by sky-high interest rates reflecting investor fears of a default.

Uncertainty over Greece’s future has grown since late last year, when early elections were called for January, and led to a slow-motion bank run.

A report released Wednesday showed deposits have fallen by almost a fifth since December, from 160.3 billion euros to 134 billion euros by April.

The report by the Parliamentary Budget Office noted the economy had once more begun to shrink in the last quarter of 2014 after a brief period of growth.

Businesses that survived the five-year crisis are now facing funding difficulties and “huge problems with foreign clients and suppliers,” it said.

“If the uncertainty surrounding the political and economic situation continues, the situation will deteriorate dramatically,” the report said.

Speaking on local radio, Deputy Prime Minister Yannis Dragasakis said he believed at least an interim agreement would be reached in the first few days of May.

“Today we are seeking a solution. But ‘any solution’ is not good enough. It must be a viable solution,” Dragasakis told Sto Kokkino radio.

Prime Minister Alexis Tsipras said this week he expects a deal to be reached by May 9, in time for the next finance ministers’ meeting two days later.