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Greece facing crunch creditor talks

Published 11/05/2015

Greek Finance Minister Yanis Varoufakis arrives for a meeting of the eurogroup finance ministers at the EU Council building in Brussels. (AP)
Greek Finance Minister Yanis Varoufakis arrives for a meeting of the eurogroup finance ministers at the EU Council building in Brussels. (AP)

Greece appears to have made some progress in bailout talks with its European creditors but the chances of a deal on Monday look slim, finance ministers said.

Greece, which is facing a liquidity crunch that could see it go bankrupt within weeks and possibly leave the shared euro currency, has to secure a deal with creditors to get a delayed bailout loan - worth 7.2 billion euro (£5.2bn) - that will help it pay upcoming debts.

As they arrived for a meeting in Brussels, finance ministers from the 19-country eurozone said progress has been made since their last such meeting in April ended in acrimony.

Greece's Yanis Varoufakis laid out the hope that a deal could be secured "within days" though his partners in the eurozone appeared more sceptical.

Most observers think the Greek government will be able to make a 770 million euro (£553m) payment due Tuesday to the International Monetary Fund, one of its main creditors, after it scraped together reserves from local governments and state entities like hospitals.

But Greece will increasingly struggle to meet other debt obligations and pay state wages and pensions as its economy is headed for another recession and it cannot borrow on international bond markets at affordable rates.

Without the bailout money, which has been withheld for months pending progress in the discussions, Greece faces the prospect of defaulting on its debts, introducing controls on the free flow of capital and an exit from the euro.

Despite three months of talks, Greece and its creditors have failed to agree on further reforms and savings Athens needs to qualify for the loan instalment.

Greece hasn't had any bailout money since last August and has relied on its own resources.

Ahead of the wider meeting, which will include representatives the European Commission, European Central Bank and IMF, Mr Varoufakis met German Finance Minister Wolfgang Schaeuble, one of the toughest negotiators in the talks with Greece.

Several finance ministers expressed hope that a recent re-jigging in Greece's negotiating team in the bailout talks will have produced some results, but not all.

Greece's left-led government was elected in January on a mandate to bring crippling austerity policies to an end, blaming them for the parlous state of the Greek economy.

The budget cuts required in return for 240 billion euros (£172bn) worth of rescue loans contributed to a massive shrinkage in the Greek economy and the sky-rocketing of unemployment and poverty.

The Greek government has indicated it will reject any deal that doesn't guarantee a credible prospect of ending its economic crisis. It has even hinted at a possible referendum on any deal that emerges that runs counter to its electoral mandate.

Over the past few weeks, concerns over a Greek default and an exit from the euro have risen amid the impasse. Still, many in the financial markets think a deal will be brokered in time to avoid that fate.

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