Greece 'running out of money' as hopes of imminent deal to end debt crisis fade
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Version 0 of 1. The head of the Eurogroup of finance ministers has said Greece is running out of money as hopes of a deal to end the country’s worsening debt crisis by the end of this week have again been dashed. Sources in Brussels said there was no prospect of concluding negotiations between the Syriza-led coalition in Athens and its creditors by the time the 18 finance ministers meet in Riga at the end of this week. On a fresh day of turmoil, Greek shares and bonds came under heavy selling pressure and local authorities reacted furiously to the sequestering of their spare funds by the central bank in order to pay the day-to-day bills of the central government. Jeroen Dijsselbloem, the Dutch finance minister and leader of the Eurogroup, said he still expected a deal to be struck in the coming weeks and that it was in the interests of the eurozone for Greece to remain in the currency bloc. Brussels wants Greece to agree to stick broadly to deeply unpopular economic policies in return for receiving fresh financial support worth more than €7bn, which would allow it to avoid defaulting on debt repayments. Talks with Athens, however, have proved difficult. If Greece leaves the eurozone “you get very dangerous instability,” Dijsselbloem told the broadcaster RTL. “It’s in the interests of Greece and the eurozone as a whole to avoid that.” “The money is starting to run out,” he added. Financial markets were rattled by reports that the European Central Bank was losing patience with Athens and preparing to limit the help it has been providing to keep Greek banks afloat. Interest rates on five-year Greek bonds, seen as a benchmark of investor confidence, rose to record highs and are at levels that signal expectations of a debt default or writedown. The Greek stock market closed more than 3% down, at its lowest level since 2012. Eirini Tsekeridou, a fixed income analyst at Julius Baer, said: “We still believe that in the end, the Greek government will agree to the terms of the creditors regarding taxes, pensions, privatisations etc in order for the next tranche of €7.2bn to be released. “Although we regard a Greek exit from the eurozone as unlikely and with limited contagion risk towards the rest of the eurozone, we avoid holding Greek debt at this juncture due to the high political instability.” Mayors attending an emergency meeting of the Central Union of Greek Municipalities (KEDE) hurled abuse at the deputy finance minister, Dimitris Mardas, when he announced that the “internal loan” to the central bank would be enforced for at least two months. “Is this your democracy?” protesters shouted. Media outlets quoted several of the mayors as telling Mardas: “The money is ours and we will do what we want with it.” Municipalities are demanding that the order be immediately revoked, but the Bank of Greece has been told to use the reserves to help cover Greece’s looming debt repayments and wage and pension bills. KEDE, which is expected to meet in emergency session for several hours yet, said it would hit back with a series of protests and demonstrations and take the case to Greece’s supreme court. The chairman of the White House council of economic advisers has warned that the world economy would be badly hit if Greece were to crash out of the single currency. In an interview with Reuters in Berlin, Jason Furman swept aside the notion that a so-called Grexit could be contained easily. “A Greek exit would not just be bad for the Greek economy, it would be taking a very large and unnecessary risk with the global economy just when a lot of things are starting to go right,” he said. |