GLOBAL ECONOMIC MELTDOWN: Athens On The Brink - Grexit Edges Closer As Markets Brace For Default; Greece Remains Defiant As Creditors Up Pressure For A Deal!
April 19, 2015 - GREECE - Eurozone officials meet for further crunch talks on Greece this week amid warnings that time is running out for the country to avoid defaulting on its debts and being jettisoned from the single-currency bloc.
Deputy finance ministers will convene on Wednesday to pave the way for talks among finance chiefs in the Latvian capital, Riga, at the end of the week, a Greek government official told Reuters.
But investors are increasingly sceptical that a rescue deal can be reached between Greece and its creditors. Financial markets do not expect a breakthrough at that meeting of the so-called Eurogroup – the eurozone’s finance ministers – and focus is already shifting to early May when Greece is scheduled to repay almost €1bn (£700m) to the International Monetary Fund – a sum most experts say Athens will not be able to raise.
Greece’s recently elected leftwing-led government has so far failed to present a package of reforms to the IMF and its eurozone partners that those creditors deem serious enough to unlock the remaining bailout funds.
“Although time is running short, there are clear indications that the Eurogroup meeting in Riga on 24 April might not bring a breakthrough,” said Reinhard Cluse, an economist at the bank UBS.
“In the absence of a deal in the next few weeks, the government might not be able to avoid default, which – we fear – would likely raise the risk of ‘Grexit’ [a Greek exit].”
Greece faces a series of repayments and interest payments on its debts in the coming weeks as well as its usual pensions and public-sector salary obligations. Experts say money is running out.
“As to how much funds they have left to pay back maturing debt, it is almost zero,” said Gabriel Sterne at the consultancy Oxford Economics. “It is more of a question of what barrel they can still scrape to find some money to stave off default.”
Greece owes money to the IMF, the European Central Bank (ECB) and the European commission following two bailouts in 2010 and 2012.
|Greek finance minister, Yanis Varoufakis, speaking at the Brookings Institute|
in Washington. Greece is due to repay almost €1bn to the IMF in early May.
Photograph: Paul Richards/AFP/Getty
Germany in particular has made it clear that it wants strong commitments to reforms. The country’s finance minister, Wolfgang Schäuble, has said there is not enough detail from Greece for rescue funds to be released and has expressed scepticism that any progress will be made in Riga.
There was, however, some support for Greece’s position at last week’s IMF meeting in Washington where Poul Thomsen, head of the fund’s European department, said the reforms being demanded from Athens should be slimmed down.
Further ahead, economists warn that a €7.2bn package would merely buy some time for Athens but by no means guarantee Greece could remain in the eurozone – something polls suggest most Greeks want.
Even if Greece could get help to meet payments to the IMF on 1 May and 12 May, a “really big crunch” looms in July and August when €6.7bn of bonds held by the ECB mature, said Alastair Winter, chief economist at the broker Daniel Stewart.
“Nobody in Greece – or outside for that matter – is facing up to the reality that a lot more than the final €7.2bn will be needed,” said Winter. “The result will be growing chaos in Greece, and discord and disarray in the eurozone in the coming months.”
Such concerns are growing on financial markets. Jitters about Greece in effect becoming bankrupt and being forced to leave the currency union pushed up the yields of government bonds from other countries on the eurozone’s periphery last week. Yields were all higher – meaning prices were down – on Portuguese, Spanish and Italian bonds on Friday.
At the same time, yields on benchmark 10-year German government bonds, or bunds, fell to a record low of 0.05%, reflecting their perceived safe-haven status among investors. Yields on shorter dated German bonds are already negative, meaning people are in effect paying the German government to park money with it.
The Greek gridlock was likely to dominate market moves again this week, said economists at Daiwa Capital Markets.
“A fraught week lies ahead, primarily for Greece, but also perhaps for euro-area equity markets and bond markets in the euro-area periphery. And negative yields on 10-year bunds seem likely to be reached,” they wrote in a research note.
While economists appear divided over whether a Greek exit from the eurozone would lead to full-scale break-up of the monetary union, the ECB president, Mario Draghi, has sought to allay such fears.
Draghi said at the IMF’s meetings in Washington over the weekend that financial buffers were sufficient to prevent contagion spreading to other weak economies in the currency union. But he warned that Europe would be entering “uncharted waters” that made the outcome of a default uncertain. - The Guardian.
Greece Remains Defiant as Creditors Up Pressure for a Deal
|U.S. President Barack Obama and European Central Bank President Mario Draghi|
call on the Greek government to do more to resolve the standoff
amid depleting cash reserves.
U.S. President Barack Obama and European Central Bank President Mario Draghi both called on the Greek government to do more to resolve the standoff amid depleting cash reserves. Greek officials, including Deputy Prime Minister Yannis Dragasakis, stood their ground.
“We want a viable solution within the euro,” Dragasakis said in an interview published Sunday in Athens-based To Vima newspaper. Still, “we don’t budge from our red lines.”
“We want a viable solution within the euro.”
Deputy Prime Minister Yannis Dragasakis
Snap elections or a referendum are possible should negotiations with creditors stall, Dragasakis said.
European peers want Greece to do more to revamp its debt-burdened economy before they release another tranche of the 240-billion-euro ($259 billion) bailout program. At stake is Greece’s ability to avoid a default and stay in the 19-nation euro area.
The showdown will figure heavily at a meeting of euro-area finance ministers in Latvia on April 24. In the shadow of the brinkmanship, Greek government bonds last week suffered their worst week since Alexis Tsipras was elected as prime minister in January on a platform promising to undo the tough bailout terms.
Greece’s so-called red lines are a refusal to cut wages and pensions, introduce new taxes or sell state assets, Alternate Health and Social Security Minister Dimitris Stratoulis said in an interview Saturday with Athens-based Skai TV.
Energy Minister Panagiotis Lafazanis was also defiant, saying the country won’t agree to any privatizations, according to an interview published Sunday in Athens-based Real News newspaper.
While “so-called” partners, including unidentified International Monetary Fund officials, want to “blackmail” the Greece into adopting measures that would hurt the working class, “we won’t betray the people’s mandate,” he said.
‘Realistic Reform Plan’
Draghi said it was “urgent” that Greece do “much more work” to show it can satisfy the terms of the bailout. “We all want Greece to succeed,” Draghi said Saturday in Washington. “The answer is in the hands of the Greek government.”
His comments were echoed by Deputy Managing Director David Lipton, who said the IMF wants to intensify dialog with Greece on the basis of more specific proposals, according to an interview published Sunday in Italy’s Il Sole 24 Ore newspaper.
The government is taking action and will continue to respect the will of the electorate, a party spokeswoman said on Sunday.
“The Greek government has presented a realistic reform plan that doesn’t contain recessionary measures or burden the weaker layers of society, yet gives the economy breathing space,” Syriza party spokeswoman Rania Svigou said, according to an e-mailed transcript of her comments. “The government will exhaust all possibilities for a solution that respects the mandate of the Greek people.”
Draghi said Greek banks continue to meet the requirements for Emergency Liquidity Assistance, a financial lifeline the ECB decides on each week. The funding has so far helped to avoid a meltdown as the wrangling over aid has gone on.
The emergency aid “will continue to be given to the banks if they’re judged to be solvent and if they have adequate collateral, which is the case now,” Draghi said.
Greece needs to repay April 20 about 80 million euros in interest on bonds held by the ECB.
U.S. officials also urged a speedy resolution to Greece’s talks with its creditors. Obama said April 17 that the Greek government needs to show its creditors that “you’re trying to help yourself,” he said.
A deal between Greece and its creditors won’t be ready by the euro-zone finance ministers’ meeting, Eurogroup President and Dutch Finance Minister Jeroen Dijsselbloem said on Saturday. The French and German finance ministers agreed.
German Finance Minister Wolfgang Schaeuble declined to comment in Washington on Friday when asked whether European partners were preparing a safety net to prevent a euro exit in case of a Greek default.
“The Syriza-led government will carry out the reforms the Greek people need, not ones requested by our creditors,” Alternate Health Minister Stratoulis told Skai TV. The country won’t be pressured “by euro-exit threats.” - Bloomberg.
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