Minister warns of ‘rupture’ in Greece
Government must provide list of reforms to get bailout payment
ATHENS, GREECE Greece’s government is prepared for a “rupture” with creditors in its bailout talks and is being deliberately vague about its intentions as a negotiating tactic, a cabinet minister said Friday.
Separately, a government official said Greece has made clear during negotiations with the eurozone and International Monetary Fund that the country “will not continue servicing its public debt through its own means, if the creditors don’t proceed directly with the disbursement of (bailout) instalments delayed since 2014.”
The official spoke only on condition of anonymity in line with government rules.
Greece has been unable to borrow on international markets since 2010 due to high borrowing rates that reflect a lack of investor confidence in the country. It has relied since then on funds from a 240 billion euro ($330 billion) bailout from other eurozone countries and the International Monetary Fund.
But its creditors are refusing to release the last instalment, worth more than 7 billion euros ($9.6 billion), unless the government produces an acceptable list — by Monday — of reforms aiming to restore the country’s tattered economy. The country faces a credit crunch, with estimates it will run out of cash sometime in April.
“It is hard to know whether the government’s claim that it cannot continue servicing its debt without more bailout funds is a threat or just a statement of fact,” said Megan Greene, chief economist at Manulife Asset Management. “Either way, the German response will be the same as always: implement reforms and you will get bailout funding, otherwise forget it.”
European economic powerhouse Germany is Greece’s largest single creditor, and has been the most vocal critic of Athens’ handling of its financial crisis.
With a severe credit crunch looming, “the only option for Greece to get money relatively quickly is to propose serious reforms on Monday and begin implementing them immediately,” said Greene.
German central bank president Jens Weidmann told Germany’s Focus magazine that not paying creditors would inevitably lead to default.
“If a member country of the currency union decides not to fulfil obligations, and stops the payments to bondholders, then a disorderly default in fact cannot be avoided,” Focus quoted Weidmann as saying on its website.
“The economic and social consequences would be severe for Greece and anything but recommended.”
He said other countries’ governments “have the impression that a solution can still be reached, and are therefore continuing the talks. But we do not have much time left.”
In Athens, Alternate Minister for International Economic Relations Euclid Tsakalotos said that if negotiations don’t go well, the government is prepared for a “rupture” with its partners.
Responding to a question on private Star TV, Tsakalotos said the government would not be negotiating properly if it didn’t envisage a rupture, although he would not be drawn on what that might entail.
The minister also said the government was intentionally being vague about its intentions with its partners as a negotiating tactic.
“We create ambiguity with our partners about our intentions, deliberately, because they must know that we are ready for a rupture,” he said. “Otherwise you don’t negotiate.”
A government official said the reform list was to be discussed in Brussels by representatives of the creditors, dubbed the “Brussels Group,” on Saturday.
The reforms are expected to generate 3 billion euros ($4 billion) in revenue in 2015, the official said, adding that the measures do not include cuts in salaries or pensions, and would not push the economy into recession. No details on the exact reforms were made public.