ATHENS, Greece [Hellenic Republic]. The governor of Greece’s central bank has warned that his country faces an “uncontrollable crisis”, if a deal cannot be reached in the coming days to release €7.2bn (£5.1bn) in bailout funds and prevent Athens defaulting on its debts.
Amid a fierce war of words between the radical Syriza government and its creditors, Yannis Stournaras used his annual report to the Greek parliament to stress the seriousness of Greece’s plight.
If a deal can be done in the coming days, he said, it would, “fend off the immediate risks to the economy, reduce uncertainty and ensure a sustainable growth outlook for Greece”.
“Failure to reach an agreement would, on the contrary, mark the beginning of a painful course that would lead initially to a Greek default and ultimately to the country’s exit from the euro area and – most likely – from the European Union.”
His remarks came amid growing fears that Greece may be unable to avoid plunging out of the euro. In the UK, a spokeswoman for David Cameron said the government was “stepping up” its preparations for a possible “Grexit”, which she said was a serious economic risk to the UK.
“We don’t go into the specifics of these plans but of course they will be looking at how we make sure we have looked at the impacts on business, the banks and the financial sector and tourists,” she added.
Stournaras warned that failure to reach a deal would result in a deep recession and soaring unemployment in Greece, and force it to be “relegated to the rank of a poor country in the European south”.
He also called on Greece’s creditors to honour their promise to offer debt relief, as part of the second bailout of the country in November 2012. Any new deal must be “based among other things on our European partners’ delivery on their commitments in November 2012 to Greek debt relief, which now need to be specified in greater detail”, he argued.
His intervention came as Greece and its creditors prepare for a fresh attempt at negotiations on Thursday, with just days to go before the country is due to make a €1.6bn payment to the International Monetary Fund.
Hopes of a deal have been severely tested in recent days by the increasingly bitter war of words between the radical Syriza government and its creditors, with the European commission president, Jean-Claude Juncker, previously seen as sympathetic to Greece’s cause, accusing Alexis Tsipras and his colleagues of misleading the Greek public about the negotiations.
Greece received public support on Wednesday from the Austrian chancellor, Werner Faymann. Austria has tended to take a hard line in previous rounds of Greek debt talks; but social democrat Feyman, who also toured Greek schools and hospitals, criticised some of the measures being demanded by Greece’s creditors, the European Central Bank, the European commission and the International Monetary Fund.
“I know there were a number of proposals, also from the institutions, that I also don’t find in order. High joblessness, 30-40% (with) no health insurance and then raising VAT on medicines. People in this difficult situation cannot understand that.”
Separately, the European Central Bank is due to decide later on Wednesday whether to raise the ceiling on the amount of funding – known as emergency liquidity assistance (ELA) – Greece’s central bank is allowed to offer to its struggling private sector banks. The limit has repeatedly been increased in recent weeks, to €83bn, to prevent Greek banks from collapsing, amid fears of capital flight.
Credit: The Guardian (UK)
