Greece has become deadlocked with its international creditors just days before a potential default as its leaders were accused of "playing with the future of the country".
Meanwhile Greek prime minister Alexis Tsipras said that Greece was not to blame for the lack of a deal. In an op-ed in French paper Le Monde this weekend, he blamed "the obsession of some institutional representatives who insist on unreasonable solutions and are being indifferent to the democratic result of recent Greek elections".
The debt-laden nation must pay back €304m (£218m) in loans due to the International Monetary Fund on Friday, but is struggling to reach a deal with the European Commission, the European Central Bank and the IMF needed to unlock €7.2bn in vital funds due under its second bailout in 2012.
Greece – led by left-wing Syriza since its January election win – is refusing to give ground on the pension cuts and labour market reform demanded by creditors in order to release the funds, scotching hopes that a deal might be reached over the weekend. Tsipras held a conference call last night with German Chancellor Angela Merkel and French President François Hollande over the impasse.
Finance Minister Yanis Varoufakis – recently sidelined by Tsipras – meanwhile denied speculation that he would quit, tweeting that "rumours of my impending resignation are (for the umpteenth time) grossly premature".
But the glacial pace of the negotiations drew fire on both sides from senior European officials. Klaus Regling, managing director of the European Stability Mechanism, the eurozone’s financial rescue fund, warned: “If the Greek government refuses to engage in the reform process, it is playing with the future of the country. The risk is then great that past sacrifices will have been in vain.”
Jose Manuel Barroso, who held the presidency of the European Commission for a decade, added that politicians had taken “too long” to find a solution. He told the BBC: “Sometimes I get the impression that people are waiting for an accident so that they can really focus [on] avoiding a bigger disaster. It’s too long, this time that has been taken to find a solution. I believe it’s important now to find that solution.”
According to Greece’s Economy Minister, George Stathakis, the state will be able to scrape together enough funds to meet Friday’s IMF payment, although a total of €1.6bn is due by the end of the month, when the bailout programme expires.
Even if Athens passes that hurdle, it will almost certainly fail to make €3.5bn of interest payments due on Greek bonds held by the ECB on 20 July.
The uncertainty has tipped Greece’s devastated economy back into recession, while fears over default and a potential "Grexit" from the euro have prompted savers to pull cash out of the nation’s banks, which are being propped up by emergency support from the ECB. Households and businesses pulled out nearly €5bn in April amid worries that euro-denominated savings could be forcibly converted into vastly cheaper drachmas. Deposits could also be seized to recapitalise banks in a rescue akin to the "bail-in" of Cypriot banks two years ago, savers fear.
The Barclays analyst Michael Gapen expects Syriza to back down rather than risking the nuclear scenario of default. He said: "Without an agreement, Greece could descend into what would effectively be an 'exit' from the euro area, where defaults and capital controls become a permanent feature."
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