Greece is facing a full-blown banking crisis after a meeting of eurozone finance ministers broke down in acrimony and recrimination on Thursday evening, bringing the prospect of Greek exit from the eurozone a step nearer.
Some €2bn of deposits have been withdrawn from Greek banks so far
this week – including a record €1bn yesterday – triggering fears that a
breakdown in talks would spark a further flight of funds. The German
leader Angela Merkel, French president François Hollande and Greek prime
minister Alexis Tsipras agreed to stage an emergency EU summit on
Monday as a last critical attempt to prevent Greece going bankrupt. A
representative of the European Central Bank told the meeting it was unsure whether Greek banks would have the funds to be able to open on Monday.
As thousands of pro-EU protestors gathered outside the Athens
parliament building, leaders of the eurozone and the International
Monetary Fund aimed bitter criticism at the leftwing Greek government,
accusing it of lying to its own people, misrepresenting and misleading
other EU leaders, refusing to negotiate seriously, and taking Greece to the brink of catastrophe.
The Luxembourg talks broke down within an hour of discussions about
the Greek crisis starting, indicating the bad blood between both sides. Christine Lagarde,
the head of the IMF, said there was an urgent need for dialogue “with
adults in the room”. She added: “We can only arrive at a resolution if
there is a dialogue. Right now we’re short of a dialogue.”
Lagarde has taken a tough line on debt talks with Athens over the
past four months, since the radical leftist Syriza government took
control and insisted creditors drop proposals for further austerity as
the price of releasing the last tranche of bailout funds. At the talks
in Luxembourg she reportedly introduced herself to Greek finance
minister Yanis Varoufakis as “the criminal in chief”, in reference to
Tsipras’s claim earlier this week that the IMF bore “criminal
responsibility” for the situation in Greece.
Advertisement
Pierre
Moscovici, the European commissioner for economic affairs, who has been
more sympathetic to the Greek case, said: “There’s not much time to
avoid the worst.” He appealed to the Tsipras government to return to the
negotiating table, making it plain that Athens has been treating its
creditors and EU partners with contempt. He said Athens had made no
credible counter-proposals on the bailout terms and said that Varoufakis
tabled no new proposals on Thursday, despite the session of Eurogroup
finance ministers being billed as the last chance to secure a deal
sending Greece a financial lifeline and keeping it in the euro. He
called on the Greek government “to avoid a fate that would be
catastrophic”.
The current bailout for Greece expires on 30 June when Athens is also
due to repay the IMF around €1.6bn. Lagarde said if the payment is not
made on time, Greece will be declared to be in default and would
disqualify itself from receiving any further IMF funds.
Jeroen Dijsselbloem, the Dutch finance minister and president of the eurogroup, said: “No agreement is yet in sight.”
Varoufakis reiterated demands for debt relief as part of a deal. The
creditors concede that this could be agreed in the future, but that
first Greece has to meet the terms of the present rescue package which
expires in 11 days. “We are dangerously close to a state of mind that
accepts an accident,” said Varoufakis.
As the talks quickly broke down in Luxembourg, in Brussels, Donald
Tusk, the president of the European council, promptly convened an
emergency leaders’ summit on Monday evening, putting the onus on both
Merkel and Tsipras as the two key leaders to bend towards concessions to
clinch a deal.
A senior EU official taking part in the meeting told the Guardian
that Monday’s summit was convened as soon as EU leaders learned of the
collapse of the Luxembourg talks. The spectre of a Greek banking
collapse under the weight of withdrawals prompted the meet, he said.
The standoff is over what actions Greece has to take to access the remaining €7.2bn in bailout funds.
Dijsselbloem made plain that even if agreement is reached in the end,
the rescue package would need to be extended beyond 30 June, as there
simply was not enough time left to negotiate the fine print and get
through the parliamentary procedures needed in several eurozone
countries.
At issue is just a €2bn financing gap between what the Greeks are
prepared to offer and what the creditors are demanding, but the problem
goes deeper into questions of power and rules. Dijsselbloem said any
deal that might be reached would need to maintain the credibility of the
eurozone as a rules-based community.
As the meeting degenerated into rancour, Greek banks stood on the
brink of collapse after a flood of cash withdrawals on Thursday, raising
the prospect of capital controls and temporary bank closures. The five
major commercial banks saw around €2bn of deposits withdrawn by
customers anxious that Greece was nearing the end of its credit line
with lenders and about to go bust.
Dijsselbloem demanded that the Greek government act quickly to
restore trust and stem the haemorrhaging of deposits. “It’s a sign of
great concern for the future,” he said. “It can be dealt with, but it
requires quick action.”
Top officials from the European Central Bank told the meeting that
Greece might need to impose capital controls within days. They said the
banks would be open on Friday. “On Monday, I don’t know,” Benoit Coeure
from the ECB board was said to have told the ministers.
The precarious situation, which has previously forced the ECB to
regularly increase its credit line to Greek banks, formed the backdrop
to intense negotiations between Athens and the troika of creditors – the
European commission, the International Monetary Fund and the ECB.
Lagarde said there would be “no grace period or possibility of delay”
to loan payments that are due on 30 June. The hardening of the IMF’s
stance follows an admission by the debt-stricken Greek government on
Wednesday that it would be unable to pay without a deal with Brussels
and the IMF to provide extra funds.
Lagarde said the Syriza administration would need to make further
reforms to its pension system to get a deal, something prime minister
Tsipras has refused to countenance.
Writing in German newspaper Der Tagesspiegel, Tsipras said pensioners
had become the main breadwinners in many families, meaning cuts in
pension payments would increase poverty.
“Traditionally, this solidarity has meant that young people, through
their contributions, fund the pensions of their parents,” he said.
“But during the Greek crisis, we’ve witnessed this solidarity being
reversed as the parents’ pensions fund the survival of their children.”
But the IMF and Brussels want further cuts to bring down the cost of
pensions, which account for 16% of GDP, with further restrictions on
early retirement and lower supplementary pension payments.
The Greek government has maintained, throughout five months of talks,
that it remains ready to join talks to secure an agreement, but could
not accept the current proposals to cut pensions or the insistence it
achieve a 1% budget surplus in the middle of a recession.
Chief negotiator, Euclid Tsakalotos, warned on the BBC’s Today
programme on Radio 4 that “if Greece goes out, the euro might break
down.” He said: “Once one country has left, you change a monetary union
into a fixed exchange rate system, where it’s a cost-benefit analysis
whether another country leaves.
“My greatest fear is that the breakup of the euro will return [us] to
the competitive devaluations, and the nationalisms, and the kind of
politics we had in the 1930s. If we don’t [have a deal], we have to go
to the Greek people, because we have no mandate to leave the euro, and
that would be a very bad eventuality.”
No comments:
Post a Comment