US warns of danger to world economy as fears grow over Greece
The United States warned last night of a possible accident for the world economy if Greece and its creditors missed their June deadlines to avert a debt default.
Germany said there was no sign of a breakthrough. With Athens struggling to make repayments due next month, the debt stand-off between Greece and its European Union partners overshadowed a meeting of policymakers from the Group of Seven rich nations otherwise held to focus on ways to get the global economy growing strongly again.
American Treasury Secretary Jack Lew repeated warnings not to minimize the global stability risk of Greece sliding out of the eurozone, even if most of its debt is no longer held by commercial banks.
"There is great uncertainty in there at a time when the world needs greater stability and certainty," Lew told reporters after the G7 meetings.
Greece - which has been crippled by a debt crisis for the past five years, and is due to pay back €300m to the International Monetary Fund next Friday - although the IMF has said that deadline could be pushed back until later in June. New figures released yesterday showed that. Greek bank deposits fell by €5.6bn in April.
The pace of outflows picked up and took the balance to its lowest level in more than a decade. Yesterday people could be seen queueing at banks across Athens.
On June 30, Greece's bailout expires, meaning it would be unable to call on cash currently available to it.
Mr Lew said time was precious. "If you look from January until now, too much time has been spent unproductively," he said. He called for agreement quickly on the broad terms of a deal to avoid the risk of stumbling on difficult details at the last moment.
"I think waiting until the day or two before whatever the deadline is, is just a way of courting an accident," he said.
Greek officials earlier this week said they were close to an outline agreement. That claim was quickly quashed by top officials from eurozone countries and the IMF.
German Finance Minister Wolfgang Schaueble said last night that there was no indication of a breakthrough. "The positive news from Athens is not fully reflected in the talks," he said.
However, France struck a more optimistic note, saying officials were not considering the possibility of Greece leaving the eurozone.
"There is no Grexit scenario," Finance Minister Michel Sapin told reporters.
Trying to show that Greece had not dominated their meetings, G7 officials said they had discussed ways to finally put behind them the financial crisis of 2007-09.
Canada and Germany renewed their calls for countries to focus on bringing down their budget deficits as the best way to get their economies growing again.
But in a reminder of the long-standing divisions among policymakers over the merits of austerity or public spending, the United States said major economies should consider using fiscal policies to support growth and avoid deflation.
The G7 said China was progressing towards having its renmimbi currency included in a basket of currencies used by the IMF. That would be a recognition of Beijing's clout in the global economy. But Germany said China was unlikely to be given the green light this year.