Mario Draghi, the president of the European Central Bank, has warned that time is rapidly running out to resolve the Greek debt crisis, as financial markets took fright at the prospect of a looming default. Shares fell across Europe after the latest breakdown in talks between Athens and its creditors diminished hopes of a deal being agreed at a meeting of eurozone finance ministers in Luxembourg on Thursday.
Giving evidence to the European parliament in Brussels, Draghi said: “We need a strong and comprehensive agreement with Greece. And we need it very soon.” His remarks came amid evidence of the fragile state of Greece’s banks, where the pace of deposit withdrawals increased to €400m (£289m) on Monday.
Capital flight is making Greece more dependent on emergency funding from the ECB but Draghi hinted that there would be no immediate loss of support from Frankfurt, despite the souring of the relationship between Athens and its creditors.
“While all actors will now need to go the extra mile, the ball lies squarely in the camp of the Greek government to take the necessary steps,” Draghi said.
Alexis Tspiras, Greece’s prime minister, showed no sign of giving in to demands to make the state pension less generous, raise VAT or water down his government’s plans to reform labour laws in favour of workers.
“We will await patiently until the institutions accede to realism,” Tsipras told the Greek newspaper Efimerida ton Syntakton. “We do not have the right to bury European democracy at the place where it was born.”
He blamed “political expediency” on the part of lenders for the impasse and their insistence on new cuts in pensions “after five years of looting under the bailouts”. The stance adopted by Tsipras infuriated officials at the European Commission in Brussels, who took the unusual step of releasing details of how an attempt to revive talks on Sunday broke down in less than an hour.
The “last-chance” negotiations represented a worsening of the situation as the Greeks sought to reopen issues already agreed upon, EU officials said on Monday. Signalling disenchantment with the Greek negotiations, the officials voiced deep pessimism that a deal can be struck.
“We are ready to convene at very short notice. The only condition is that something serious is on the table that makes discussions productive. That has not been possible,” said an official briefed on the events of the past three days.
Greek finance minister Yanis Varoufakis said he is not planning to present new reform proposals at a meeting of the eurogroup committee of eurozone finance ministers later this week, according to excerpts from a German newspaper interview published on Tuesday.
Asked if he would present such a list, Varoufakis was quoted as saying: “No, because the eurogroup is not the right place to present proposals which haven’t been discussed and negotiated on a lower level before.”
However, the Greek negotiation team is “available at any time” to find a comprehensive solution with its partners, Varoufakis said, adding that officials from the three institutions representing Greece’s lenders needed to come back to the negotiation table “with a clear, robust mandate”.
Varoufakis repeated his call to German chancellor Angela Merkel to give his country a “speech of hope”, to signal Europe was ready to end its demands for austerity, similar to that given to Germany at the end of the second world war.
The meeting of the eurogroup committee of eurozone finance ministers in Luxembourg is seen as yet another last chance to reach a deal before Greece’s current bailout package expires at the end of the month.
Athens must pay €1.6bn to the International Monetary Fund by 30 June and requires the release of a further €7.2bn in bailout funds in order to meet the payment. In return, Greece’s creditors – the ECB, European commission and the IMF – are demanding economic reforms.
Responding to Tsipras’s statement that he would patiently wait for a call to resume talks, an EU official responded: “He may not have time for patience.” As Brussels considers how to cope with a Greek default, Berlin is said to be particularly exercised about the risks of social breakdown in Greece.
Unnamed German government sources told Munich’s Süddeutsche Zeitung that an emergency summit on Greece could be convened in Brussels as early as Friday if the eurozone finance ministers fail to make a breakthrough on Thursday in Luxembourg.
The German sources warned of Greek banks being closed down and capital controls imposed over the weekend. Sources in Brussels last night denied there were any plans for an emergency summit this week. “Nothing planned. Nothing decided. All eyes on Eurogroup,” said an official in Brussels.
“We should work out an emergency plan because Greece would fall into a state of emergency,” said Germany’s European commissioner, Guenther Oettinger. “Energy supplies, pay for police officials, medical supplies, and pharmaceutical products and much more” needed to be ensured, he said.
Athens’s benchmark ATG equity index fell 4.7% on Monday, with the Athens stock exchange FTSE Banks Index down 8%. National Bank of Greece fell 5.7% and Bank of Piraeus dropped 12.2%.
Other European bourses were affected by the gloomy mood. The key German and French share indices were down almost 2%, while the Italian index lost 2.5%. In London, the FTSE 100 closed at its lowest level in three months, dropping 74 points or 1.1% to close at 6710.52.
