Wednesday

6th Jul 2022

EU sets 'decisive' 11 may deadline for Greece

  • EU finance commissioner Pierre Moscovici said Greece must "speed-up" work on reforms or face default. (Photo: EU Council)

Forget the 24 April Eurogroup meeting in Riga. The new deadline to find an agreement between Greece and its lenders is now the next Eurogroup planned on 11 May.



In an interview with the Financial Times Friday (17 April), EU commissioner for economic and financial affairs Pierre Moscovici said Greece must "speed up" work on reforms and that the 11 May meeting "certainly must be decisive".

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"The April 24 meeting in Riga must not be a wasted moment; it must be a useful moment in which we see concrete progress in catching up with those reforms".

This is the first time a top EU official has clearly indicated a date for an agreement on Greek reforms to unblock a €7.2 billon loan to the cash-strapped country.

Before now, EU sources had said that the 24 April meeting was the date when Greeks expected a deal, but that the EU was waiting for a detailed list of reforms with an assessment of their cost and revenues.

Moscovici’s statement indicates the EU is getting impatient with the left-wing government of Alexis Tsipras in Athens, but is also worried about the prospect of a possible default.

Discussions with Greece have been "not precise enough. We are not talking about nothing. We are talking about things, but now we need to make progress," Moscovici told the FT.

Meanwhile, a EU commission spokeswoman announced that the Brussels Group, comprising experts from Greece, the EU and the International Monetary Fund (IMF), will meet during the weekend to try to make progress in talks to agree on the set of Greek reforms.

Tsipras said Thursday the disagreement were on "labour relations, the social security system, the VAT increase and the rationale regarding the development of state property".

Eurozone officials complained that Greek representatives were still not being detailed enough about the state of the country’s finances.

With Greece due to pay €4 billion in loan and bond repayments next month in addition to the monthly €1.5 billion in pensions and salaries, the risk of a default has increased.

Greek daily Kathimerini reported on Friday that central banks in neighbouring countries "have effectively quarantined Greece" in order to reduce exposure to a Greek default.

"The central banks of Albania, Bulgaria, Cyprus, Romania, Serbia, Turkey and the Former Yugoslav Republic of Macedonia have all forced the subsidiaries of Greek banks operating in those countries to bring their exposure to Greek risk (bonds, treasury bills, deposits to Greek banks, loans etc. down to zero," wrote Kathimerini.

The risk of a failure to reach a deal at next week's Eurogroup was highlighted by Greece’s finance minister Yanis Varoufakis.

"If our partners in the institutions say, 'No liquidity for you, no disbursements, no new contract,' then of course this [Greece’s financial situation] is unsustainable," he told the Huffington Post website while in Washington.

On Thursday, the IMF chief, Christine Lagarde, rejected the idea of giving Greece extra time to repay its debt.

These worries explain why Moscovici believes the mid-May Eurogroup will be "decisive".

He assured, however, that a default and Greece leaving the Eurozone was not an option in Brussels.

"Grexit would be bad for the eurozone as a whole; bad for Greek people; bad for the financial system; of course it would be bad. The financial risk could be addressed, but it would be bad. So no Grexit is our motto," he said.

Greece risks default in mid-May, S&P warns

Greece will be forced to default on its debts if a deal with its EU creditors is not reached by mid-May, a leading credit rating agency has said.

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