Thursday, June 18, 2015

Greeks admit they will default at the end of the month as central bank turns on government

By Mehreen Khan, Athens 17 June 2015

Prime minister Alexis Tsipras says he is ready to assume responsibility for his government’s negotiating stance as “uncontrollable crisis” beckons

Alexis Tsipras, Greece's prime minister, pauses during a news conference with Austria's chancellor Werner Faymann at Maximos Mansion in Athens, Greece

Alexis Tsipras, Greece's prime minister, pauses during a news conference Photo: Bloomberg

The Greek government has admitted it will become the first developed country in history to default on the International Monetary Fund (IMF) if its creditor powers fail to strike a deal with the Leftist government over its Eurozone future in the coming days.

Desperation forces Greeks back out on to the streets

With just 13 days before the country’s bail-out programme officially expires, finance ministers will gather in Luxembourg on Thursday to discuss whether to finally give assent to release bail-out cash and stave off an unprecedented default.

Before the 11th hour attempt to secure a deal, Athens’ chief negotiator said his government had run out of cash to make a €1.6bn payment to the IMF, also on June 30.



Greek bail-out

Photo: Reuters

Total debt pile: €320bn

Greece still owed: €7.2bn

Debt settled by: 2057

How did Greece get here?

In January left-wing government Syriza promised to end years of austerity measures but remain a member of the Eurozone

What went wrong?

Negotiations descended into acrimony. Creditors want economic reforms in return for more aid, but Syriza won't budge on key election promises

When is the deadline?

June 30 - when Greece's bail-out programme expires and it owes €1.6bn to the IMF

What if they don't pay?

Greece will still be in the Eurozone, but will get no further aid. The central bank could stop providing money to Greek banks forcing the government to issue an alternative currency

"At the moment we haven’t got the money," said Oxford-educated minister Euclid Tsakalotos.

Greece has been without any aid from its creditors since August 2014.

The Syriza government has been locked in five month stalemate over the release of a remaining €7.2bn owed to the country under its current programme. Athens only avoided falling into arrears with the IMF earlier this month by taking recourse in an obscure “bundling” method which delayed debt payment until the end of June.

Mr Tsakalotos, who was drafted in by the Greek prime minister to head up negotiations, said the country had been “squeezing every last bit of drop of liquidity” to service its international obligations.

“There is no financing, we haven’t got access to the markets, we haven’t got money that hasn’t been paid since the summer of 2014 so obviously we won’t be able to have the money to pay that [the €1.6bn to the IMF],” he said.

Relations between the Leftist Syriza government and its paymasters has reached breaking point in recent days. Alexis Tsipras, the prime minister, has accused the IMF of bearing “criminal responsibility” for his country’s plight, while previous Greek ally Jean-Claude Juncker has declared he has lost faith in the government.

Mr Tsipras seemed to brace himself from the fall-out of his government’s negotiating stance, saying he was ready to "assume the responsibility to say ‘the big no’ to a continuation of the catastrophic policies for Greece".

He later held a brief phone conversation with Mr Juncker, where the pair agreed to talk again at a later date.

Hopes of a settlement at a meeting of Eurozone finance chiefs has rapidly faded. Greek finance minister Yanis Varoufakis has said he will not present any new proposals to his colleagues, at what has been seen as a last-ditch attempt to rescue the country from the fate of a euro exit.

Thousands of anti-austerity protesters took to the streets of central Athens on Wednesday, in the first major demonstration against Greece's creditors since Syriza took office.

Panagiota Bleta, a 40-year old Athenian demonstrator said she supported a euro exit if it ended the country's "humiliation".

"It's time to create a Europe of equals," she said. "Greece is part of a third-speed Europe."

View image on Twitter Mehreen @MehreenKhn

Anti austerity protestors gathering in Athens. Plenty of music, carnival atmosphere so far

3:29 AM - 18 Jun 2015

In more evidence that Syriza was running out of friends, the Bank of Greece, also turned on the government in a startling intervention which warned Greece was on the way to becoming “a poor country in the European South”.

A report from the Bank of Greece said a missed payment would trigger a "credit event" which would inexorably lead to an ejection from the euro, and ultimately the European Union.

AEP: Greek central bank is playing with political fire

This would result in a “deep recession, a dramatic decline in income levels, an exponential rise in unemployment and a collapse of all that the Greek economy has achieved over the years of its EU, and especially its euro area membership,” said the report.

"From its position as a core member of Europe, Greece would see itself relegated to the rank of a poor country in the European South."

European Parliament president Martin Schulz added that any abandonment of the euro would also result in a member state's ejection from the EU.

Syriza hit back at the apocalyptic prediction, accusing the Bank of breaching its constitutional role and attempting “to contribute to the creation of an asphyxiating framework in the moves and negotiating abilities of the Greek government.”

In its latest weekly decision on Greek bank funding, the European Central Bank decided to increase its drip feed of emergency cash on Wednesday. The ECB raised the ceiling on its liquidity assistance by €1.1bn, taking the total level of aid to €84.1bn.

• Nervous UK companies begin to assess impact of Greece exit

President Mario Draghi said earlier this week there was no fixed ceiling on the amount of liquidity available to Greece. But the ECB will soon be forced to take a judgement on the country’s stalled negotiation as the June 30 deadline approaches.

The solvency of the banking system has come under pressure as most ordinary Greeks have pulled their deposits out of the banks. Figures from the Bank of Greece showed more than €30bn has left the financial system from October to April.

Greeks admit they will default at the end of the month as central bank turns on government - Telegraph