Greece told catas­tro­phe is loom­ing

Top EU fi­nance of­fi­cials blame new gov­ern­ment for the debt talks stale­mate as the dead­line nears.

Los Angeles Times - - THE WORLD - By Carol J. Wil­liams carol.wil­

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.

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