Sat | Aug 19, 2017

Greece gets temporary lifeline, turns hope to new summit

Published:Sunday | June 21, 2015 | 6:00 AM
Greece's Prime Minister Alexis Tsipras.

With the clock running down on Greece's chances of avoiding a painful exit from the euro, the country got a temporary lifeline on Friday to help it cope with a bank deposit drain and turned its hopes to a European leaders' summit on Monday.

The European Union (EU) president warned that the situation was "getting critical" as Greece approaches a deadline on June 30, when it has to make a debt repayment it cannot afford without more loans from creditors.

Uncertainty over whether Greece might default on that payment - something that could lead to the country eventually falling out of the euro - increased after a meeting on Thursday ended in discord over what reforms the country should make to get more loans.

Several European countries are now openly saying that they are getting ready for the possibility that Greece might leave the euro.

"The game of chicken needs to end and so does the blame game," EU President Donald Tusk said in a video message.

"We are close to the point where the Greek government will have to choose between accepting what I believe is a good offer of continued support or to head towards default."

In the streets of Athens, there were no visible signs of distress or larger than usual lines at banks or supermarkets. Officials, however, signalled an increase in withdrawals and transfers, which can also be made electronically.

An EU official said Greeks had taken about €2 billion (US$2.3 billion) out of their accounts in the last three days.

"Money is going out of the Greek banks faster than at any time before," said the official, who spoke only on condition of anonymity because of the sensitive nature of the situation.

As a result, the European Central Bank's (ECB) governing council decided to provide more emergency credit for Greece's banks to help them cope with the situation.

 

ECB increasing support

A Greek banking official, who spoke on condition of anonymity because the announcement was not made public, confirmed the decision. The official declined to give a sum.

The ECB has been steadily increasing the support it allows Greek banks to draw on. It's not thought that it would turn off that tap until it thinks Greece is definitely going bust, and certainly not before an emergency summit of the Eurozone's 19 leaders on Monday.

However, if no deal emerges with creditors soon that will allow the country to pay upcoming debt payments, starting with one at the end of the month, the ECB would be under intense pressure to stop pumping money into a banking system that might collapse.

The creditors want Greece to agree to new reforms and a tighter budget before they give it more loans. Greece's radical left-led government, on the other hand, came to power in January on the promise to end such measures, which may have helped tame the budget deficit, but have also increased poverty and unemployment.

Greece has to pay €1.6 billion to the International Monetary Fund on June 30. It cannot afford that without a deal that would unlock €7.2 billion in bailout loans.

Around Greece on Friday, newspaper headlines warned that time was running out. The daily Ethnos called Monday's summit the "Last Chance for a Deal" while the pro-government Efimerida ton Syntakton said creditors had put a "Knife to our Throat".

Athenian Giorgos Tsakoyiannis, 55, said he believed a deal would emerge eventually.

"When two parties want to resolve something, there's no way it won't happen," he said. "It looks extreme, but politics is never extreme. It's a dirty game."

 

Positive development

Greek Prime Minister Alexis Tsipras, who visited Russia to meet President Vladimir Putin, sought to portray Monday's summit as "a positive development on the road to agreement." He claimed that those "who invest in crisis and horror scenarios will be proven wrong".

"We sought final negotiations to be at the highest political level in Europe and now we are working for the success of this summit," he said. The central bank of Greece said "the gap between Greece and its creditors is not a large one".

As finance ministers from across the 28-country EU wrapped up talks in Luxembourg on Friday, there were indications that technical talks would resume over the weekend before Eurozone finance ministers meet again on Monday ahead of the leaders' summit later in the day.

"We are a little sceptical that we will be able to prepare a great deal more than today," German Finance Minister Wolfgang Schaeuble said. "But maybe the readiness in Greece to do what is necessary will increase over the weekend. The ball is in Greece's court.

"I'm not so sure that I will be able to announce sensational news to you on Monday," he said.

Russia and Greece have signed a deal to build an extension of a prospective gas pipeline that would carry Russian gas to Europe through Turkey.

 

... Signs deal with Russia to build gas pipeline

Russia has promised Greece hundreds of millions of dollars in transit payments yearly if it agreed to build the pipeline.

The deal comes as Greece is at an impasse in talks with its creditors for the additional loans it needs to avoid defaulting on debt payments.

Russian Energy Minister Alexanader Novak said he and his Greek counterpart signed the memorandum on Friday during an investment forum in St. Petersburg.

Greek Prime Minister Alexis Tsipras is also in St Petersburg and will meet with President Vladimir Putin later in the day.

Construction of the Greek pipeline is expected to start next year and be completed in 2019.