Following a failure to reach an agreement over economic reforms, in which both the Greek government and international creditors blamed each other over the breakdown in talks, the Greek central bank forewarns that the country might be on a “painful course” towards defaulting and a subsequent exit from the eurozone.
The failure to reach a deal is causing a major delay in the release of €7.2bn of much needed bailout funds.
The Greek central bank also noted that the Grexit saga has caused €30bn to be withdrawn from Greek bank accounts since October last year and that a continuation of the status-quo would extensively accelerate Greece’s economic meltdown.
“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,” reported the Bank of Greece in a report.
“Striking an agreement with our partners is a historical imperative that we cannot afford to ignore.”
Interestingly, Greek shares rose 0.8% in mid-morning trade on the Greek stock exchange despite the warnings . Greek’s benchmark index has fallen 11% over the past 5 days, with bank shares taking the worst falls.
There are two weeks remaining left for Greece to finalise a deal with its creditors or face the prospect of defaulting on their €1.6bn loan due to be repaid to the IMF.
European Union (EU) Commission President Jean-Claude Juncker claimed the Greek government had not told the truth about the commissions’ new reformed propositions.
“I am blaming the Greeks [for telling] things to the Greek public which are not consistent with what I’ve told the Greek prime minister,” explained the EU commissioner.
Mr Tsipras had previously asserted that creditors wanted to increase VAT on electricity whilst other Greek ministers have denounced propositions to increase sales tax on medication.
However Mr Junker maintained that: “I’m not in favour, and the prime minister knows that, … of increasing VAT on medicaments and electricity. This would be a major mistake.”
“The debate in Greece and outside Greece would be easier if the Greek government would tell exactly what the Commission… are really proposing,” he added.
Greek finance Minister Yanis Varoufakis retorted that EU proposals did include VAT increases: “Juncker either hadn’t read the document he gave Tsipras – or he read it and forgot about it.”
Humiliation of the Greek People
Mr Tsipras accused the EU and IMF of collaborating and utilising tax hikes and reducing pensions to “humiliate not only the Greek government… but humiliate an entire people”.
Mr Tsipras asserted that the IMF and the EU are weighed down in “criminal responsibility” for increased austerity measures that had strangled the Greek economy into a deeper and deeper recession.
Simultaneously, Washington’s representative, Josh Earnest, said that both Greece and its creditors should have the intention of revitalising the Greek economy without damaging and distorting global financial markets.
The Greek central bank encouraged the EU to elaborate on promises of debt relief to Greece – a key demand from Athens.
Its statement called for an agreement which “would allow Greece to benefit from the favourable global environment and the ECB’s quantitative easing programme.”
The bank highlighted their goals by concluding that, “Our top priority right now should be to create, as soon as possible, those conditions that would enable the Greek economy to benefit from the favourable global economic environment and the highly accommodative monetary policy at the euro area level and speed up a sustainable return to global capital markets.”