Greece wary of failure to break deadlock

The government should conclude a deal to avoid the debt crisis spiralling

GREECE’S central bank issued its starkest warning yet about the possible consequences of failure to reach an agreement on aid, as one of the final opportunities to break the deadlock looked likely to be a short affair.

Greece’s government should conclude a deal immediately with the country’s creditors to avoid a “manageable debt crisis” spiralling into an ”uncontrollable crisis” with great risks to the banking system and financial stability, Bank of Greece governor Yannis Stournaras said yesterday.

Available evidence suggested only a little ground remained to be covered to bridge the difference between the two sides, he said.

Painful course

“Striking an agreement with our partners is a historical imperative that we cannot afford to ignore,” Stournaras said. “Failure to reach an agreement would, on the contrary, mark the beginning of a painful course that would lead initially to a Greek default and ultimately to the country’s exit from the euro area and – most likely – from the EU.”

A meeting of euro area finance ministers today had been billed by officials as a last chance to seal an agreement to free up as much as 7.2 billion (R101bn) in bailout aid in time for national parliaments to approve it before they go into summer recess.

Discussions on Greece at that meeting would be very short, an EU official said yesterday, asking not to be named in line with policy.

The Athens Stock Exchange was up 0.3 percent at 1.33pm in Athens yesterday, after dropping 9 percent over the previous two days.

The yield on Greek bonds maturing in 2017 rose 23 basis points to 29.68 percent.

As positions entrench before the finance chiefs’ meeting in Luxembourg, Prime Minister Alexis Tsipras let loose on his country’s creditors on Tuesday, saying the International Monetary Fund (IMF) bore “criminal responsibility” for Greece’s plight.

IMF chief Christine Lagarde was due in Brussels yesterday to deliver a speech on inequality.

Far from crazy

With little chance of a deal today, attention will shift to a summit of EU leaders scheduled for June 25-26 in Brussels, just days before Greece’s bailout programme expires at the end of the month.

France’s European commissioner, Pierre Moscovici, said requests being asked of Greece were far from “crazy”, and that today’s meeting would be “difficult”, but aimed at moving forward. Contentious issues of sales-tax rates, pensions and the budget deficit would be discussed, he said.

“We are waiting for concrete measures on these three points. We are not asking for crazy things,” he said on Belgium’s RTL radio yesterday.

“Yes, there is a need for a humanitarian programme,” he said, “but there must be also a reforms programme, because we live in a global market economy and the Greek economy can’t remain on the margins, like a make-believe economy.” – Bloomberg