Tuesday 20 February 2018

New eurozone fears as Greece to miss €1.6bn Troika payment

Greek Finance Minister Yanis Varoufakis has been in negotiations with the troika
Greek Finance Minister Yanis Varoufakis has been in negotiations with the troika

Peter Spence

Greece will be unable to find the €1.6bn sum it is due to hand the International Monetary Fund (IMF) next month, one of the country’s ministers has admitted.

Nikos Voutsis, the Greek Minister of the Interior, said in a TV interview: “This money will not be given and is not there to be given.”

The Greek state is due to hand over the money in four instalments in June, as part of its obligations for its 2011 bailout.

Mr Voutsis’s comments came as Yanis Varoufakis, the Greek finance minister, told The Andrew Marr Show on BBC that if progress was not made, it would be the beginning of the end for the euro project.

The finance minister said that the Syriza-led Greek government has now “made enormous strides at reaching a deal”, and that it is now up to the ECB, IMF and EU “to do their bit” and “meet us one-quarter of the way”.

One possible alternative if talks do not progress is that Greece would leave the common currency and return to the drachma. This would be “catastrophic”, Mr Varoufakis warned, and not just for Greece itself.

“It would be a disaster for everyone involved, it would be a disaster primarily for the Greek social economy, but it would also be the beginning of the end for the common currency project in Europe,” he said.

“Whatever some analysts are saying about firewalls, these firewalls won’t last long once you put and infuse into people’s minds, into investors’ minds, that the eurozone is not indivisible,” he added.

“It will only be a certain amount of time before the whole thing begins to unravel.”

Mr Varoufakis’s and Mr Voutsis’s words followed a declaration from Alexis Tsipras, the Greek prime minister, that bargaining with Greece’s creditors would soon come to a close. On Saturday he said: “We are on the final stretch of a painful and tough period shaped by the government’s negotiations with the institutions.”

“Rest assured that in this negotiation we will not accept humiliating terms,” Mr Tsipras told Syriza’s central committee. “The overwhelming majority of Greek people want a solution and not just an agreement ... it supports the government in this tough negotiation,” he added.

For Greece itself, using the common currency is now like using a “foreign currency”, and any exit from the eurozone would be “a disaster”, Mr Varoufakis said.

He continued: “Trying to get out of it is tantamount to announcing a devaluation 10 months in advance.” Economists warn that if Greece were to leave the euro area, it could trigger huge levels of capital flight. In turn, Greece would almost certainly have to resort to capital controls to stem the tide of money out of the domestic economy.

Ratings agency Moody’s has warned that there is now a “high likelihood” of such controls, which might be necessary to keep the Greek financial system alive. An estimated €30bn has been withdrawn from the country’s banks since snap elections were called in December 2014.

Mr Varoufakis said that at some point the Greek government would have to make a choice between paying salaries and paying international creditors. (© Daily Telegraph, London)


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