Ahead of today’s meeting of the euro zone’s finance ministers, the Bank of Greece warned that the country faces imminent economic collapse.
Months of talks between the Syriza-led government and its international creditors, the European Union (EU), European Central Bank (ECB) and International Monetary Fund (IMF), over the terms of an austerity programme broke down acrimoniously at the weekend. The talks, ongoing since February, centred on whether Greece would receive €7.2 billion from the institutions, if Syriza agreed to impose further cuts. On June 30, the existing programme expires, with Athens due to make a payment of €1.6 billion to the IMF.
Athens could be forced into default within weeks. On Wednesday, Syriza’s top negotiator Euclid Tsakalotos bluntly stated, “At the moment we haven’t got the money,” as Syriza has already repaid more than €13 billion since coming to power. However, Greek Finance Minister Yanis Varoufakis said his government would not table any new proposals at today’s Eurogroup meeting.
Greece’s Central Bank bluntly warned in its regular monthly statement that, “Failure to reach an agreement would… 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.”
In stark language, the statement warned that without an agreement, a “manageable debt crisis… would snowball into an uncontrollable crisis, with great risks for the banking system and financial stability. An exit from the euro would only compound the already adverse environment, as the ensuing acute exchange rate crisis would send inflation soaring.”
The bank continued, “All this would imply deep recession, a dramatic decline in income levels, an exponential rise in unemployment and a collapse of all that the Greek economy has achieved over the years of its EU, and especially its euro area, membership. From its position as a core member of Europe, Greece would see itself relegated to the rank of a poor country in the European South.”