Cyprus Mail

Eurozone warns Greece no cash till full reform deal (Updated)

Greek Finance Minister Varoufakis and EU Commissioner for Economic and Financial Affairs Moscovici speak before Eurogroup tour-de-table during informal meeting of Ministers for Economic and Financial Affairs in Riga

By Ingrid Melander and Lefteris Papadimas

Eurozone finance ministers warned Greece on Friday that its leftist government will get no more aid until it agrees a complete economic reform plan, as Athens lurches closer to bankruptcy.

Greek Finance Minister Yanis Varoufakis faced a harsh morning in which euro zone ministers bemoaned talks they felt “were going nowhere” and one minister said that maybe it was time governments prepared for the plan B of a Greek default.

Jeroen Dijsselbloem, the Dutch finance minister who chaired the meeting in the Latvian capital, slammed the door on Varoufakis’ proposal for early cash after partial reforms.

“A comprehensive and detailed list of reforms is needed,” Dijsselbloem told a news conference following a meeting in Riga. “A comprehensive deal is necessary before any disbursement can take place … We are all aware that time is running out.”

He also said a remaining 7.2 billion euros in frozen bailout funds would no longer be available after June, and Greece’s creditors would not talk about longer term funding and debt relief until Athens concluded a full interim agreement.

In a sign of the eurozone’s frustration, the discussion on Greece lasted little more than an hour, while ministers declined to go into any detail over issues such as the budget surpluses Athens might target because Greece had no details prepared.

Greek Prime Minister Alexis Tsipras said after meeting German Chancellor Angela Merkel in Brussels on Thursday he hoped for an agreement by the end of this month and Merkel on Friday reiterated her call for a deal soon.

But Dijsselbloem said finance ministers would review progress again only on May 11 – a day before Greece has to make a crucial and uncertain 750 million euro payment to the International Monetary Fund.

European Central Bank President Mario Draghi said the ECB would go on allowing emergency lending to Greek banks as long as they were assessed as solvent. But he cautioned that soaring Greek government bond yields were diminishing the value of the collateral that the banks present to get funds.

Facing a wave of deposit outflows, the banks are staying afloat with 75.4 billion euros in emergency liquidity assistance from the Greek central bank. But criticism of the lifeline is growing inside the ECB, central bank sources say, and it would be in doubt if Greece missed a payment to its creditors.

European Economics Commissioner Pierre Moscovici said despite some progress in recent days, international creditors were still nowhere near an agreement with Athens.

“Our message today is very clear: We need to accelerate, we need to accelerate from today … there is no other choice if we want to reach the goal that everyone shares, which is a stable, prosperous Greece anchored in the eurozone,” Moscovici said.

Varoufakis sought to play down the differences, saying ministers had agreed to speed up the negotiations, which have also been delayed by Greece’s insistence that EU/ECB/IMF teams avoid lengthy stays in Athens for fear of intensifying the popular backlash against the hated “troika”.

“We agreed that an agreement will be difficult but it will happen and it will happen quickly because that is the only option we have,” he told a separate news conference. He later said he was willing to find a compromise, warning of the huge cost to the euro zone if Greece were to default.


Before the tense meeting, Varoufakis offered some concessions in an effort to secure new funding before Athens runs out of money, saying in a blog post he was open to some privatisations and to a commission to supervise tax collection that would be independent of the government.

But he rejected any more wage or pension cuts and said creditors must agree on a realistic target for the primary budget surplus before debt service.

“Our government is eager to rationalize the pension system (for example, by limiting early retirement), proceed with partial privatisation of public assets, … create a fully independent tax commission,” Varoufakis said.

Greek officials say they are aiming for a primary surplus of 1.2 to 1.5 per cent of gross domestic product this year, well below the goals of 3 per cent in 2015 and 4.5 per cent in 2016 set in Greece’s 2012 EU/IMF bailout programme.

French Finance Minister Michel Sapin told Reuters there was room for manoeuvre on Greece’s primary surplus, “as long as it remains positive.”

Exactly when Greece’s cash reserves run out is unclear, but sources familiar with the matter said Athens would struggle to meet the IMF payment, and it was not certain to scrape together a targeted 2.5 billion euros from state entities’ idle cash.

Merkel appeared to send a signal of goodwill after her meeting with Tsipras on Thursday, telling reporters “everything must be undertaken to prevent” Athens running out of cash.

But the tone of finance ministers was tougher, in a clear effort to dramatise the stakes and force the novice Greek government to accept unpopular measures it had resisted such as pension and labour market reforms. Negotiations have been largely fruitless since radical leftists won power in Athens in January on a promise to reverse austerity and renegotiate Greece’s 240-billion euro bailout package.


The impact of a potential Greek default is the biggest risk to the eurozone’s economic recovery after a long crisis from which the 19-nation currency area is finally emerging.

Unlike at the height of the crisis in 2011-12, economists believe the euro zone is far better placed to withstand any Greek default because the currency bloc has its own bailout fund, support from the European Central Bank and a banking union that can protect banks from crisis fallout.

“The risk of contagion exists, but it is much lower than it was before,” Standard & Poor’s Chief Economist Jean-Michel Six told Italian financial daily Il Sole 24 Ore.

The lack of progress is starting to hurt Tsipras’ popularity and that of his government. Varoufakis warned in his blog against pushing Greece too hard, saying the Greek people would not support more spending cuts after one of the deepest recessions in Europe since the 1950s.

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