Friday

23rd Oct 2020

Grexit fears hang over Eurogroup meeting

  • Failure to find an agreement between Greece and its lenders could trigger 'a collapse of all the Greek economy has achieved' (Photo: Eric Maurice)

Greece and its creditors were preparing for a crucial Eurogroup meeting on Thursday (18 June) amid growing concerns of a Greek exit from the eurozone or even the EU.

The alarm was raised by a Bank of Greece report warning that the crisis could get out of control and "relegate" Greece "to the rank of a poor country in the European South" if no deal was reached before 30 June to lend €7.2 billion to Greece.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

"Failure to reach an agreement would mark the beginning of a painful course that would lead initially to a Greek default and ultimately to the country's exit from the euro area and – most likely – from the European Union," Greece's central bank warned in its annual report on monetary policy.

"A manageable debt crisis, as the one that we are currently addressing with the help of our partners, would snowball into an uncontrollable crisis, with great risks for the banking system and financial stability."

The consequence would be "a collapse of all that the Greek economy has achieved over the years of its EU, and especially its euro area, membership"

The bank's governor is Yannis Stournaras, finance minister from 2012 to 2014 in Antonis Samaras' centre-right government.

"The central bank has been warning the Greek government for several months, explaining the consequences and the risks of the situation. It is more on the creditors' side than on the governement's side," an EU source told EUobserver.

"Stournaras is a good technician, while the government doesn't weigh all the consequences," the source said, adding that the bank's report "reflects the pessimism of the creditors".

"[He] has a seat at the European Central Bank's governing council. He is aware of the debates and he sends message."

The speaker of the Greek Parliament, Zoe Konstantopoulou, said the central bank's report was "unacceptable".

“Stournaras has contributed to the fiscal, memorandum-based policy. He now tries, in a non-democratic way, to prevent the ultimate debt write-off claims of the government,” she said.

Meanwhile, talks for an agreement were still stuck on Wednesday, with Greece and the institutions (the EU, European Central Bank and International Monetary Fund) waiting for the other side to present a new proposal.



The discussion between eurozone finance ministers at the Eurogroup could "be pretty short", said another EU official, adding that "many gaps remain between the institutions and the Greek authorities".

"Ministers will certainly conclude that the ball is in the Greek camp," the source said.

The divergences between Greece and its lenders are "not only a fiscal gap, it has very much to do also with the structure of the tax system and with pensions," the source explained.

This "has a fiscal impact in the short run and fiscal sustainability implications in the medium- and long-term which are much more important than people realise."

The IMF and ECB chiefs, Christine Lagarde and Mario Draghi, will participate in the meeting. But if no progress is made, an emergency summit of EU leaders could be organised during the weekend.

A regular EU summit will take on 25-26 June. But it would be very late by that time to draw up an agreement to be endorsed by all member states before 30 June, especially where a parliament vote is needed.



Whenever a deal is clinched, "a hell of a lot of work," will still have to be done, said the EU official.

Greece situation 'dramatic'

ECB chief Draghi has said "urgent action is needed" for a bailout deal, but Greek PM Tsipras says he's waiting for creditors' "realism".

Germany asks capitals to give a little in EU budget impasse

European Parliament negotiators are demanding €39bn in new funding for EU programmes such as Horizon research and Erasmus, in talks with the German EU presidency on the budget. Meanwhile, rule-of-law enforcement negotiations have only just begun.

News in Brief

  1. Commission to press Croatia on migrant 'abuse' at border
  2. Belarus opposition awarded 2020 Sakharov Prize
  3. Belgium's foreign minister in intensive care for Covid-19
  4. MEPs restrict CAP funding for bullfighting
  5. Coronavirus: Liège is 'the Lombardy of the second wave'
  6. UK to keep out EU nationals with criminal past
  7. Report: EU to restrict travel from Canada, Tunisia, Georgia
  8. Pope Francis supports same-sex civil unions

EU countries stuck on rule of law-budget link

Divisions among EU governments remain between those who want to suspend EU funds if rule of law is not respected, and those who want to narrow down conditionality.

Stakeholders' Highlights

  1. UNESDAMaking healthier diets the easy choice
  2. Nordic Council of MinistersUN Secretary General to meet with Nordic Council on COVID-19
  3. UNESDAWell-designed Deposit Return Schemes can help reach Single-Use Plastics Directive targets
  4. Nordic Council of MinistersNordic Council meets Belarusian opposition leader Svetlana Tichanovskaja
  5. Nordic Council of MinistersNordic Region to invest DKK 250 million in green digitalised business sector
  6. UNESDAReducing packaging waste – a huge opportunity for circularity

Latest News

  1. Nato and EU silent on Turkey, despite Armenia's appeal
  2. EU tells UK to decide on Brexit as deal 'within reach'
  3. EU farming deal attacked by Green groups
  4. France vows tough retaliation for teacher's murder
  5. All eyes on EU court for decision on religious slaughter
  6. 'Big majority' of citizens want EU funds linked to rule of law
  7. EU declares war on Malta and Cyprus passport sales
  8. EU Commission's Libya stance undercut by internal report

Join EUobserver

Support quality EU news

Join us