Schaeuble flags risk of default with Greece stalling

File picture shows German Finance Minister Wolfgang Schaeuble attending a news conference in Berlin March 18, 2015. — Reuters pic
File picture shows German Finance Minister Wolfgang Schaeuble attending a news conference in Berlin March 18, 2015. — Reuters pic

ATHENS, May 10 — German Finance Minister Wolfgang Schaeuble warned that governments can sometimes default by accident, in a jab at Greek officials still holding out for a better deal from creditors as their cash supplies run critically low.

Greece is preparing for a meeting of euro-region finance ministers tomorrow with the European Central Bank threatening to restrict the country’s access to bank funding unless there’s progress toward an aid deal. Greece’s creditors say the government’s plans for fixing the economy aren’t yet detailed enough to justify more financial support.

“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 yesterday. 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.

Greece’s Deputy Foreign Minister Euclid Tsakalotos, who is in charge of negotiations, said “any delay in achieving a compromise has to do with one and only one reason, and this is the political differences between the government and the institutions.” His comments were made in an interview with the daily newspaper Avgi.

Election mandate

The Greek government, elected in January on a pledge to end austerity, has been resisting European pressure to comply with the terms of the country’s 2012 bailout. As Prime Minister Alexis Tsipras seeks a way to release aid without breaking his promise to voters, Athens has been forced into increasingly desperate measures to meet the state’s obligations.

Officials from Greece, the euro area and the International Monetary Fund are holding talks in Brussels this weekend, while Tsipras called a meeting of his governing council in Athens for midday today. Some ECB Governing Council members are demanding tighter restrictions on Greece’s access to the central bank’s emergency liquidity facility because the country’s financial system might not be sufficiently solvent.

“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.

As the four-month standoff derails an economic recovery in Greece, Europe’s most indebted state, amid concerns the country could be forced out of the euro, Greek institutions are showing signs of strain.

Denying report

The government ordered the central bank to issue a denial yesterday after the Efimerida Ton Sintakton newspaper in Athens published a report saying that central bank employees had leaked documents criticizing the Tsipras administration.

The Bank of Greece said in an e-mailed statement the newspaper report was wrong.

Support for Tsipras is ebbing. Fifty-four per cent of Greeks back the government’s negotiating strategy, a Marc poll for Efimerida Ton Sintakton showed yesterday. That compares with 82 per cent in February.

Tsipras’s Syriza party remains the country’s most popular all the same, with 36 per cent backing versus 21 per cent 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 any more for reaching this deal, there’s only a matter of political will.”

‘More time’

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, an Italian daily newspaper, that Greece hasn’t 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 tomorrow. We will need more time, but I don’t know how much.”

Without clear signs of progress tomorrow, or if there are any problems 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 said. — Bloomberg

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