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28th Jan 2023

Brussels: No plans being made for Greek default

  • The commission has said Greece has seen 'important progress' in recent days (Photo: European Commission)

The European Commission has denied that it is making preparations for a Greek default after a series of comments by German authorities that some have taken as signals that Berlin is readying itself for precisely such a situation.

The EU executive’s economy spokesman, Amadeu Altafaj-Tardio told reporters in Brussels on Monday (12 September) that Sunday’s announcement by the Greek government of a fresh round of €2 billion in cuts and tax rises "restates" Athens’ fidelity to the budget discipline efforts demanded by international lenders in return for bailout funds.

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"The decisions taken by the extraordinary meeting of the Greek cabinet reinforce and restate the commitment of the Greek authorities to meet all the agreed targets," he said. "This is the essence of the conditionality that is attached to the financial assistance of the euro area and the IMF".

Asked whether the commission was working on a default scenario, Altafaj-Tardio said: "We are not working on such a hypothesis."

On Sunday, Der Spiegel reported that Germany's finance ministry is exploring Greek default scenarios, including a possible disorderly unwinding of its debt obligations.

As European markets tumbled on the back of the rumors, the German government on Monday attempted to undo some of the damage caused by the report, as well as comments from senior officials that appeared to suggest the country was preparing for the worst case scenario of Greece leaving the euro.

Economy minister Philip Roesler insisted that Germany does not want to expel the heavily indebted nation.

"Our common goal is the stability of the euro and we want Greece to stay in the euro," he said. Two days ago, Roesler said that an orderly default of the country is no longer taboo.

Government spokesman Steffen Seibert backed Greece's efforts. Berlin "assumes that Greece is doing everything it can" he said.

"Our goal is quite clear: We want to stabilise the eurozone as a whole," he added.

However, Seibert also warned: "Our line on Greece is clear: We will help, but only under strict conditions."

If the country does not meet the demands of international lenders, "then the next tranche cannot be paid. That is quasi-automatic," he continued.

Altafaj-Tardio said that he expects officials from the troika - the commission, the European Central Bank and the International Monetary Fund - to return to Athens this week, although he could not offer a specific date. He added the review mission is likely to complete its work by the end of the month.

Last week, troika inspectors abruptly ended their mission to the country. The reason given for their sudden departure was that the country had more technical work to do, but speculation mounted that the government was not meeting its targets

"A time-out was decided by both parts. There was important progress in the last days. Therefore the troika can resume its work," he continued.

He said that once the review mission is complete the EU and IMF will hand over the latest chunk of bailout cash: "This will allow the euro area and IMF to take the necessary decision to release the sixth tranche."

Greece unveils fresh cuts as euro pessimism spreads

The Greek government has unveiled a fresh round of austerity measures amounting to €2 billion as pressure mounts on the country to deliver on its commitments to reduce its debt-load.

German court: Parliament must not be sidelined in future bailouts

Germany's highest court on Wednesday approved the country's participation in the Greek bailout and eurozone rescue fund. But also that the German parliament must have more say when it comes to agreeing further bailout packages. Chancellor Merkel welcomed the ruling.

French banks hit amid worries over Greek exposure

Major French banking stocks were pummelled on Monday on the back of persistent worries that Greece is on the verge of defaulting on its loans. As shares tumbled, EU leaders have scrambled to get ahead of the curve.

Merkel, Sarkozy: ‘Future of Greece is in euro’

German Chancellor Angela Merkel and French President Nicolas Sarkozy attempted to calm market anxiety over a possible Greek default on Wednesday evening, affirming their commitment to Greek membership of the euro.

EU task force for Greece ‘here to help, not control’

The head of an EU task force for Greece said on Thursday that the aim of the newly established body is to support the country as it attempts to slash its public debts. The team arrived in Athens as fresh figures put unemployment in the country at a record 16.3 percent, with 32.9 percent of young people out of work.

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