Greece may have only a couple of weeks left before it faces real problems meeting its financial commitments, the country’s finance minister conceded Monday as talks with European creditors dragged on without agreement.
Following a meeting with his peers in the 19-country eurozone, Yanis Varoufakis said Greece was being strangled by a liquidity problem that could become “binding” in a couple of weeks.
“The liquidity issue is an incredibly urgent issue,” he said. “Let’s not beat about the bush and pretend otherwise …. It seems to me that from the perspective of the timeframe that we are facing, we’re talking about the next couple of weeks.”
Greece is facing an acute cash crunch that many in financial markets think could see the country default on its debts, put up restrictions on capital flows and possibly leave the euro currency. It’s one of the great uncertainties surrounding the global economy.
For over three months, Greece and its creditors have been trying to agree on a list of reforms and budget measures to get a bailout loan — worth 7.2 billion euro ($8 billion) — that will help it pay upcoming debts as well as meet its day-to-day obligations on things like wages and pensions. The latter are thought to be around 1.5 billion euros through this month.
Given the absence of that money, Greece has been relying on its own resources and has even resorted to scraping together enough reserves from local governments and state entities like hospitals.
Those measures have helped it meet both internal and external commitments over recent weeks. And on Monday, the country authorized a debt repayment worth 757 million euros ($844 million) to the International Monetary Fund due Tuesday.
The talks with creditors appeared to get back on track Monday following a fairly acrimonious meeting in the Latvian capital of Riga last month.
The eurozone’s top official, Jeroen Dijsselbloem, said progress was made at the meeting in Brussels but that “more time and effort” was needed to reach a deal.
“There are time constraints and liquidity constraints and hopefully we will reach an agreement before time runs out and before money runs out,” said Dijsselbloem.
Varoufakis agreed that “there has been considerable convergence” in the talks over recent weeks and noted progress on issues such as privatization, bad loans and tax reform. He also said discussions are taking place “in good spirits” and that his sometimes strained relationship with German Finance Minister Wolfgang Schaeuble was improving. Monday’s discussions between the two were the “friendliest” yet, Varoufakis said.
Greece’s new left-led government was elected in January on a mandate to end crippling austerity policies, which Germany and Schaeuble himself were instrumental in instigating. The budget cuts required in return for 240 billion euros worth of rescue loans since 2010 contributed to a massive shrinkage in the Greek economy and skyrocketing unemployment and poverty levels.
The Greek government has indicated it will reject any deal that doesn’t offer a credible prospect of ending its economic crisis and has hinted that a possible referendum may be called on any deal that runs counter to its electoral mandate.
Varoufakis said a referendum is always an option available to the Greek government to “elicit” the support of the Greek people. However, he insisted that it’s “not something that’s on the radar screen.”
And Dijsselbloem said it may not be possible to pursue if cash-strapped Greece is to get the money that it so badly needs. Implementation of any reforms is necessary, Dijsselbloem insisted, if the bailout cash is to be released. Any referendum would likely take weeks to legislate for and enact.
Earlier, Germany’s Schaeuble said it “could be perhaps a correct step to let the Greek people decide.”
Back in 2011, Greece’s then-prime minister, George Papandreou, floated the idea of a referendum on Greece’s bailout but was rebuked by his counterparts in Europe.
“The decision lies with Greece,” Schaeuble said. “We just want to help Greece, but Greece must do its part as well.”
Varoufakis also sought to downplay talk that the Greek government had discussed putting up restrictions on the free flow of capital to stem any deposit outflow from the country.
“Capital controls and a monetary union are a contradiction in terms,” he said.