Greece told catastrophe is looming
Top EU finance officials blame new government for the debt talks stalemate as the deadline nears.
International creditors warned Greece on Thursday that catastrophe looms for the heavily indebted country unless it comes up with a credible plan for reforming the economy and gaining extension of a bailout program that expires in 11 days.
Top finance officials of the 28-nation European Union and its 19-nation subset that uses the euro common currency put the blame squarely on Greece’s new far-left political leaders for failing to bring any new proposals to stalemated talks on averting a default on its debts at the end of this month.
When the talks in Luxembourg broke down after just an hour, European Council President Donald Tusk called an emergency summit in Brussels for Monday to “urgently discuss the situation of Greece at the highest political level.”
Thursday’s meeting of the Eurozone finance officials was earlier billed as a “make-or-break” attempt to resolve the standoff between Greek politicians and the country’s creditors after talks last week left the two sides accusing each other of inf lexibility and unreasonable demands. But the Greek delegation failed to propose any new ideas for tackling the nation’s staggering debt or balancing its budget, the creditors said.
“This can’t be about smoke and mirrors, it has to be tangible proposals,” said Christine Lagarde, managing director of the International Monetary Fund. She called on Greek leaders to resume a dialogue with their creditors and to facilitate serious negotiations by making sure there are “adults in the room.”
She warned Athens against counting on any further grace period for paying an already late $1.8-billion loan installment by June 30. The IMF lends money on behalf of 188 member countries and will be forced by institutional policy to cut off Greece if it defaults, Lagarde said.
Athens has received $270 billion in bailout funds since 2010 from the IMF, the European Central Bank and the European Commission, in exchange for promises to make deep budget cuts, raise taxes and reduce corruption, among other reforms.
Over the five years of painful austerity measures, the Greek economy contracted by 25% and unemployment climbed to 26%. Greeks have grown resentful of the hardships imposed by their creditors, and that discontent brought the far-left Syriza party to power in January after its politicians promised to secure an easier repayment plan.
Finance Minister Yanis Varoufakis told reporters after the latest meeting that he warned the creditors that “we are dangerously close to a state of mind that accepts an accident.”
He appeared to be alluding to reports that Greeks have begun withdrawing euros from their bank accounts in fear that a default will lead to their savings being converted to a new national currency that would quickly lose value.
The Greek central bank issued a dire warning Wednesday that failure to secure an extension of the bailout program beyond June would “snowball into an uncontrollable crisis,” with the run on deposits quickly collapsing the banking system and no plan in place for acquiring more euros.
Time is running out to reach a deal but there is still a possibility to avert disaster by making tough compromises, Eurogroup leader Jeroen Dijsselbloem told reporters after the meeting.
“The ball is clearly in the Greek court to seize that opportunity,” Dijsselbloem said of the narrowing window for negotiation.
Asked what measures were being taken to protect the other Eurozone states from damage in the event Greece defaults, Dijsselbloem said that the lenders’ priority was to keep Greece in the currency alliance but that preparations were underway for all potential alternatives.