Wednesday

28th Sep 2022

Greece and lenders 'playing chicken' over euro exit

  • ECB chief Draghi spoke of 'unchartered waters' (Photo: europarl.europa.eu)

The stand-off between Greece and its lenders deepened over the weekend ahead of a meeting of euro finance ministers on Friday (24 April), with both sides exchanging barbs over the risk of a Greek default and its consequences for the eurozone.

On Friday, Eurogroup president Jeroen Dijsselbloem said both parties should avoid "a game of chicken to see who can stick it out longer. We have a joint interest to reach an agreement quickly".

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

  • Dragasakis hinted at possible snap elections or a referendum if no agreement could be found (Photo: Odysseas Gp)

It is, however, precisley what they are doing.

EU and International Monetary Fund (IMF) leaders warned that Greece had to make quick progress to finalise a list of reforms that would enable it to receive a €7.2 billion loan.

But they hinted that a Greek default could be managed by the eurozone.

"More work, I say much more work is needed now. And it's urgent," said European Central Bank (ECB) chief Mario Draghi in Washington, where he was attending the IMF’s Spring meeting.

"We are better equipped than we were in 2012, 2011, and 2010," he added, referring to the years when fears of a eurozone break-up were at a high.

"Having said that, we are certainly entering into uncharted waters if the crisis were to precipitate, and it is very premature to make any speculation about it," Draghi also said.

French finance minister Michel Sapin was even clearer in warning that Greece has more to lose.

"If something damaging happens, it will be for Greece that it will be serious, for the Greek people, not for the other countries of the eurozone," Sapin told reporters in Washington.

Greek finance minister Yanis Varaoufakis, for his part, warned that his country's exit would cause major problems for the rest of the region.

"Some claim that the rest of Europe has been ring-fenced from Greece and that the ECB has tools at its disposal to amputate Greece, if need be, cauterize the wound and allow the rest of the eurozone to carry on," he said on Spain’s La Sexta channel

"Once the idea enters peoples' minds that monetary union is not forever, speculation begins ... who's next? That question is the solvent of any monetary union. Sooner or later it's going to start raising interest rates, political tensions, capital flight."

In Athens, Greek ministers repeated that the government is not ready to agree to everything the lenders ask.

"There is no way we would cross red lines that we have set," said Greek deputy prime minister Yiannis Dragasakis in an interview with To Vima.

Dragasakis hinted at possible snap elections or a referendum if no agreement is found.

On Saturday, quoting sources in Athens, Germany’s Der Spiegel reported that Greece would sign on Tuesday a gas deal with Russia.

The deal would see Greece participate in the Russia-led Turkish Stream pipeline project, in return for a €3 billion to €5 billion loan which would be repaid in 2019, once the pipeline is completed.

But the report was denied by president Vladimir Putin’s spokesman in Moscow.

With Greece risking a default in May, when it has to repay €4 billion in loan and bonds, talks with the eurozone are still in a deadlock.

Athens continues to refuse the reforms demanded for its labour market, pensions, and VAT, and to undertake privatisations. Meanwhile, EU and IMF experts say Greece is still not providing enough details on its finances.

Technical talks were held over the weekend and a euro working group, at deputy finance minister level, is to take place on Wednesday.

This meeting will not bring an agreement that would allow finance ministers meeting in Riga on Friday to decide to unblock a new loan for Greece.

But it will be an opportunity to defuse what could become an out-of-control situation.

Schaeuble and Varoufakis: worlds apart

Washington got a snapshot of eurozone politics when the two protagonists in the Greek impasse voiced opposing world views at a think tank event on Thursday.

Greece raids public sector coffers to pay pensions

The Greek government is forcing the transfer of public sector money to the central bank so it can pay pensions and salaries as the impasse with its international creditors continues.

Tsipras asks for quick deal

The Greek PM met with Angela Merkel and Francois Hollande Thursday to try to shore up political support in talks with the country's lenders.

News in Brief

  1. EU okays €21bn Covid-recovery funding for Italy amid concern
  2. Greece pitches new EU fund to tackle energy prices
  3. Hungary says sanctions 'harming Europe more than Russia'
  4. France aims to start building new nuclear reactors by 2027
  5. Polish PM thinks it's 'clear' Nord Stream leaks are act of sabotage
  6. Former Jobbik MEP sentenced to prison for Russia spying
  7. There is a 'really big hole' in the Nord Stream pipeline
  8. Danish PM suspects Nord Stream leaks may be sabotage

Stakeholders' Highlights

  1. UNESDA - Soft Drinks EuropeCall for EU action – SMEs in the beverage industry call for fairer access to recycled material
  2. Nordic Council of MinistersNordic prime ministers: “We will deepen co-operation on defence”
  3. EFBWW – EFBH – FETBBConstruction workers can check wages and working conditions in 36 countries
  4. Nordic Council of MinistersNordic and Canadian ministers join forces to combat harmful content online
  5. European Centre for Press and Media FreedomEuropean Anti-SLAPP Conference 2022
  6. Nordic Council of MinistersNordic ministers write to EU about new food labelling

Latest News

  1. Underwater explosions were detected near Nord Stream leaks
  2. EU countries stall new pesticide rules, blame Ukraine war
  3. The UN's Uyghur report must push EU into China sanctions
  4. Russian diamonds ban 'would cost 10,000 jobs', Antwerp claims
  5. EU should admonish less, and listen more, to the Global South
  6. Foul play suspicions in Nord Stream leaks
  7. 'Collective guilt' — the dilemma of penalising Russia's opposition
  8. Europe's far-right celebrates Meloni victory

Join EUobserver

Support quality EU news

Join us