Greece: Europe sees little hope as finance ministers meet

Thousands of Greeks demonstrated peacefully in Athens on Wednesday calling for an end to Europe’s austerity measures [Xinhua]

You know Europe is in trouble when a foreign leader has to urge Athens and Brussels to reach a deal over Greece’s debt restructuring negotiations with the International Monetary Fund and the European Central Bank.

During the G7 Summit in Germany last week, US President Barack Obama urged both sides to show “flexibility” and reach a deal that would help Greece avoid defaulting on a debt repayment due at the end of the month.

But both sides are so entrenched that Obama would be lucky if he received a collective ‘meh’ as a response.

Greeks and other Europeans have little hope of a breakthrough compromise when European finance ministers in Luxembourg today.

No new proposals are expected from either side, raising the specter that Athens will not have access to additional funds to repay $1.7 billion to the IMF on June 30.

Some European lawmakers are saying that markets should brace for an emergency situation on July 1.

While the economic reforms – particularly to the pension system – remain highly unpopular with a majority of Greeks, most polled in local surveys say they want to remain in the eurozone.

Thousands took to the streets of Athens in a peaceful protest against the austerity measures that many in Europe want to see come into effect if Greece is to continue to receive bailout money.

The five-month impasse follows the win of the leftist Syriza party during the January general elections largely on a popular platform promise to aggressively restructure Greece’s ECB and IMF bailout debt.

On Wednesday, Greece’s Central Bank voiced alarm that unless a deal was reached with the IMF and the European Central Bank, the country would soon find itself in the midst of “an uncontrollable crisis”.

“A manageable debt crisis, as the one that we are currently addressing with the help of our partners, would snowball into an uncontrollable crisis, with great risks for the banking system and financial stability” if a deal doesn’t come through,” Greece’s Central Bank said.

But some are cautioning against waving the “Grexit” flag just yet.

If Athens misses its June 30 repayment deadline and technically defaults it will be up to the ECB to decide whether to cut off emergency lending (liquid) funds, and therefore force the Greeks to seek an alternate currency.

The ECB looks like it is reluctant to do that, perhaps even if Greece does not make its repayment on June 30.

On Wednesday, the ECB increased the amount of the emergency lending (liquid) funds from $94.3 to $95.4 billion.

The BRICS Post with inputs from Agencies