Business World

Thursday 18 January 2018

Q & A: State of play in the Greece crisis

A Greek and European flag are wrapped around their flagpole at the embassy of Greece in Berlin, Germany, Thursday, June 18, 2015. (AP Photo/Markus Schreiber)
A Greek and European flag are wrapped around their flagpole at the embassy of Greece in Berlin, Germany, Thursday, June 18, 2015. (AP Photo/Markus Schreiber)

Q: What's the state of play?

A: To say that talks on releasing much needed bailout cash for Greece have been going badly, would be an understatement. Going into yesterday's key meeting of Eurozone finance ministers, they were deadlocked. Finance Minister Michael Noonan struck a downbeat tone, saying he didn't expect much progress. Athens and its creditors have been unable to reach a deal that would see the former implement reforms and further austerity in return for €7.2bn in bailout cash needed to meet loan repayments.

Q: Haven't we been here before with talk of crisis?

A: Yes, but this time it's arguably more pressing. On June 30, Greece owes close to €1.6bn to the IMF in bundled repayments. Athens confirmed this week that it doesn't have the cash to pay up. If that occurs, the country effectively defaults. To add to the pressure, IMF boss Christine Lagarde closed one of Greece's last potential escape routes yesterday, declaring that the global lender would itself consider Athens in default if it misses the June payment, despite some reports that there might be some leeway.

Q: If it defaults, what then?

A: I wish we knew for sure. The crucial question is would a missed payment on June 30 mean Greece is regarded as being in default on the portion of its European loans as well, as the rules suggest. It had been speculated that if the payment date is missed, Greece could avoid being in default as it would enter into an arrears process with the IMF, a sort of 30-day grace period. But Ms Lagarde appeared to rule that out. If it defaults, it has been speculated that capital controls may be imposed, and Greece could ultimately end up outside the Eurozone.

Q: What's Greece's reaction?

A: Prime Minister Alexis Tsipras, on a trip to Russia yesterday, dug his heels in, and insisted that creditor demands, among them pension cuts, would deepen the economic crisis in the country. Tsipras is in a difficult position. Greeks are angered by five years of tough budget cuts and want to avoid any further austerity. But the majority also want to remain in the Euro. As the impasse deepened, deposit withdrawals from Greek banks reportedly accelerated again this week, with €3bn being pulled out between Monday and Wednesday.

Q: If Greece leaves the euro, will Ireland be affected?

A: Michael Noonan said he didn't believe there would be a contagion effect, but said high level talks were taking place between the Department of Finance, the National Treasury Management Agency and the Central Bank on the issue. Contingency plans in the event of a default or exit are being drawn up. Mr Noonan also said the Government was taking advice from the European Central Bank.

Irish Independent

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