Fra The Telegraph
Europe’s creditor powers have ruled out another “big” bail-out programme for Greece as the country edges ever-closer to an unprecedented default on its international lenders.
With relations between the debtor country and its paymasters reaching a fresh nadir on Friday, the head of Europe’s finance ministers Jeroen Dijsselbloem said there would be no repeat rescue package of the magnitude agreed in 2010 and 2012.
It had been thought that cash-strapped Athens would require a fresh round of loans worth around €50bn to €60bn at the end of June as it faces a series of crucial summer debt repayments.
However, Mr Dijsselbloem told Dutch newspaper de Volkskrant any new programme would be of a “completely different order” than the current €240bn rescue package.
Since its election in January, Greece’s Syriza-led government has been seeking a “new contract” with its creditors, pleading for relief on a €330bn debt mountain, and a relaxation of the austerity measures the country has been subject to since 2012.
• Greece’s grand plan: default and stay in the euro
• Why there’s little hope for Greece’s unemployed
•Three myths about Greece’s enormous debt mountain
Failure to inject a new round of emergency money into the country would further call into question Greece’s long-term future in the currency union. The country faces another key period of debt redemption in July and August, when €6.8bn of government bonds held by the European Central Bank are due to mature.
Defaulting on the central bank would likely lead to the ECB pulling the plug on the country, warn analysts.
Before then, Athens must scramble to find the cash it needs to pay its public sector salaries and pensions worth €1.7bn at the end of the month. The Leftist government also faces a €960m loan repayment to the International Monetary Fund in the first two weeks of May.
Greece’s standoff with its lenders escalated last week when finance minister Yanis Varoufakis was reportedly “hammered” for his failure to deliver on promises to reform the economy at a meeting in Riga.
In a bid to revive talks, Athens has now established a new negotiating team in a bid to release €7.2bn in bail-out cash.
Despite assurances that Mr Varoufakis has the full support of the government, Athens’ new unit will include prominent government officials such as Syriza’s chief economics adviser Euclid Tsakalotos.
The Brussels Group of lenders is due to hold a teleconference on Greece later today.
Jeroen Dijsselbloem (left) said there were “big, big problems” with Greece’s current attempts to release bail-out cash
Amid reports that he would now be sidelined in further talks, Mr Varoufakis vented his frustrations on social media, quoting Franklin Roosevelt in “welcoming the hatred” of his counterparts, at the weekend.
But in a sign that a compromise may be near, the Greek government is reportedly ready to scrap plans to raise the minimum wage in a fresh reform list presented to Brussels on Wednesday, according to reports in Germany’s Bild.
A minimum wage hike has been a cornerstone of Syriza’s pre-election pledge to end Greece’s “humanitarian crisis”, but has proven to be a major obstacle for creditors, who are demanding a raft of revenue-raising measures including VAT hikes and public sector privatisations.
Conservative estimates of Greece’s parlous finances expect the government to run out of cash by mid-May. In the absence of fresh bail-out money, there is a 50pc chance of “some form of Greek sovereign default,” according to Stephanie Flanders of JP Morgan Asset Management.
“Carefully handled, a partial default does not have to cause lasting damage to Greece or European markets. Nor does it have to lead to a Greek exit from the eurozone,” said Ms Flanders. “But at a minimum, investors should be prepared for a messy few months for Greek financial markets.”
A Greek default would also be a “systemic event for markets”, said analysts at Goldman Sachs.
“Peripheral spread volatility is likely to increase as time goes by, as investors will associate a higher probability of default to a higher probability of Grexit,” said Silvia Ardagna, at Goldman Sachs.
