Germany’s finance minister is never exactly a ray of sunshine but even by Wolfgang Schäuble’s standards, his assessment of the Greek situation Friday, after an apparently fruitless gathering with his European colleagues, was dour.
“Unhappy situations don’t get happier with repetition,” he told reporters after finance ministers met in Luxembourg for the second consecutive day, when asked if anything had really changed since February, when Greece’s bailout was extended in return for economic reform commitments that the EU says it has not upheld.
More worryingly still, Schäuble was pessimistic about the chances of a last-minute success at Monday’s emergency summit of eurozone leaders.
“I am not so confident that something sensational happens on Monday,” he said. “I’m skeptical about what more we can prepare on Monday, but we standing at the ready. The ball lies on the Greek side.”
That’s more or less where the ball has been all year.
Greece’s creditors, who have loaned it about €240 billion, want concrete promises of reforms and budget tightening that ensure a long-term surplus. The populist Syriza government, elected on promises of ending the austerity that it blames for slashing GDP by a quarter over the last five years, wants a more flexible approach that would see overall debt reduced as well as an easing of the policies that have brought penury to millions of Greeks.
That policy divergence has become entangled in politics — does Germany really want to do all it can to save the eurozone from cracking up? Is Greece really prepared to pull the trigger, default and leave the euro? — and personalities.
Perhaps the most visible clash of views is between Schäuble and Greek Finance Minister Yanis Varoufakis.
“I had a series of intense personal discussions with Varoufakis and we’re really people with different opinions, not only about law but also the economy,” said the finance minister of Europe’s largest economy and Greece’s largest lender.
Varoufakis has been attacked by his counterparts for not bringing in specific technical proposals during Thursday’s failed meeting of eurozone finance ministers. That creates a problem for Monday’s meeting, as leaders aren’t supposed to be delving into issues like the predicted size of Greece’s primary budget surplus or whether or not there should be higher VAT on food and medicines.
Alexis Tsipras, Greece’s prime minister, has tried to work around this by striking personal deals with German Chancellor Angela Merkel and other leaders. But the rest of the eurozone is sticking to a more traditional approach, insisting Greece consider the latest proposal from the European Commission, the European Central Bank and the International Monetary Fund.
“We are close to the point where the Greek government will have to chose between accepting what I believe is a good offer of continuing support, or head towards default. At the end of the day it can only be a Greek decision and a Greek responsibility,” said Donald Tusk, president of the European Council.
Peter Altmaier, Merkel’s chief of staff, said he still believed it was possible for Athens and its lenders to reach a deal.
“We will negotiate until the last minute,” Altmaier told Inforadio, adding that Berlin did not want “the people in Greece to be disadvantaged because their government possibly did not recognise in time that the hour has come.”Despite the looming deadline, many market analysts continue to feel that the odds are in favor of a last minute deal, but they are starting to waver.
“We believe that this is a crisis that will not be solved until the last minute and we still expect that an agreement will be reached in the coming week,” read an analysis by Danske Bank. “Of course, the risk of an ‘accident’ rises the closer they move to the edge but we believe too much is at stake and a deal will be struck at some point during next week with German Chancellor Angela Merkel playing a key role in bridging the differences.”
Without an agreement to release €7.2 billion in bailout funds, Athens is unlikely to have the money to repay the IMF about €1.6 billion due at the end of the month. June 30 also marks the formal end of Greece’s second rescue plan, cutting it off from further financial assistance and possible spending the country on a downward spiral that ends with a default and ejection from the euro.