German Finance Minister Wolfgang Schaeuble warned that sovereign defaults can catch officials off guard as Greece prepares for a finance ministers’ meeting Monday with the European Central Bank threatening to tighten the screw.
Greek officials are huddling with their creditors before the gathering in Brussels which could determine whether the ECB restricts the country’s access to emergency funding. ECB policy makers are looking for signs of concrete progress from the talks to justify maintaining access to the bank’s Emergency Liquidity Assistance.
“Experience elsewhere in the world has shown that a country can suddenly become unable to pay its bills,” Schaeuble said in an interview with Frankfurter Allgemeine Sonntagszeitung published Saturday.
Schaeuble said he’ll do everything he can to keep Greece in the euro. “If it fails, it won’t be because of us,” he added.
The ECB is seeking significant progress toward an aid agreement before its next weekly review of Greece’s emergency funding with some Governing Council members calling for the discounts on collateral posted by Greek banks to be increased. On May 6 policy makers discussed tightening access to funds if Greece’s stalemate with its creditors drags on.
“European institutions plus the IMF and Greek authorities are trying to find a solution, but the solution is in the hands of Greek authorities,” European Commission Vice President Jyrki Katainen said.
Officials from Greece, the euro area and the International Monetary Fund will hold discussions in Brussels over the weekend, a Greek official said. While both sides have declared progress in the last few days, Dutch Finance Minister Jeroen Dijsselbloem, who leads the euro-area finance ministers’ group, told Corriere della Sera Greece hasn’t yet done enough to earn more aid.
“We have made progress, but we are not very close to an agreement,” Dijsselbloem said. “It will surely not be reached at the Eurogroup meeting on Monday. We will need more time, but I don’t know how much.”
As the four-month standoff derails Greece’s economy recovery amid fears the country could be forced out of the euro, support for Greek Prime Minister Alexis Tsipras is ebbing. Fifty-four percent of Greeks back the government’s negotiating strategy, a Marc poll for Efimerida Ton Sintakton newspaper showed Saturday. That compares with 82 percent in February.
Tsipras’s Syriza party remains the most popular all the same, with 36 percent backing versus 21 percent for New Democracy, which headed the previous administration.
“The government has proved that it’s doing everything it can to reach an honest deal within the EU,” Tsipras told lawmakers in Athens on Friday. “There’s no technical issue anymore for reaching this deal, there’s only a matter of political will.”
Without clear signs of progress on Monday, or if there is any problem with a payment due to the IMF on Tuesday, the ECB could increase the discount it imposes on the collateral Greek banks post when tapping the emergency funding facility.
Both Tsipras and Greece’s finance minister, Yanis Varoufakis, have said that an agreement with creditors, which would pave the way for resuming aid flows and avert a default, is within reach. Tsipras has spoken twice this week by telephone with German Chancellor Angela Merkel.
“I’m optimistic that we will soon have a happy ending and, despite the difficulties we will face, with the people’s support, we will manage to accomplish a deal,” Tsipras told Parliament on Friday.
Greece’s government has repeatedly expressed confidence a deal was imminent, only to be rebuffed by European officials seeking more specific policy proposals in areas including labor market deregulation, a pension-system overhaul, and changes to the structure of sales tax. The standoff has led to an unprecedented flight of deposits from Greek banks and renewed concern over the country’s future within the single currency.
“Politically there is only one deadline — that’s end-June when the second plan will end,” Dijsselbloem told French daily Le Monde on May 7. “But there could also be another deadline if Athens’ liquidity problems became too pressing. It’s in our common interest to avoid getting there.”
[Bloomberg]
