Germany’s finance minister virtually ruled out a deal next week that would release bailout funds to Athens, increasing the possibility that Greece could go bust as soon as May.
Wolfgang Schäuble’s comments were the first in public by a senior eurozone policy maker to dash hopes of an agreement at a meeting of finance ministers in Riga on April 24. But they echo sentiments made in private for several days by senior officials involved in the negotiations.
“Nobody expects that there will be a solution,” Mr Schäuble said of next week’s meeting.
Officials said technical talks between Greek authorities and the country’s bailout monitors on the ground in Athens, while more constructive than last month, have barely moved forward in the past week and raised questions as to whether a deal is likely even at next month’s eurogroup meeting.
Without a deal at that meeting of eurozone finance ministers, scheduled for May 11, Athens would probably default on a €747m payment owed to the International Monetary Fund on May 12.
Standard & Poor’s, in downgrading Greek debt further into junk territory on Wednesday, said without a deal by mid-May, Athens was likely to be unable to pay creditors. The yield for Greece’s three-year bonds issued last year hit a new high of 24.6 per cent on Wednesday.
Speaking in New York on the eve of the spring IMF meetings in Washington, Mr Schäuble blamed the radical-left Syriza-led government for destroying all the improvements made by previous administrations under the bailout programme and said a new agreement remained out of reach.
“Nobody has any idea how we can agree on an even more ambitious programme,” he said. “You can’t spend hundreds of billions . . . in a bottle without a bottom.”
Athens is desperately trying to release some of the remaining €7.2bn in its €172bn international bailout but must agree and legislate new reforms before the eurogroup will approve such payments. The two sides are locked in a two-month-old stand-off over what reforms should be included in the package to release the funds.
An adviser to Alexis Tsipras, Greek prime minister, signalled that the government may have to hold a national referendum on how to proceed if the talks remain deadlocked.
“We may consider the possibility of holding a referendum if the talks reach an impasse,” said Alekos Flambouraris, a minister and long-time political mentor to Mr Tsipras. “In decisions of historic importance, it’s not a bad thing to consult the Greek people.”
The remarks by Mr Flambouraris to Greek television raised hopes in Brussels that Mr Tsipras was looking for a way out by getting the approval of a plebiscite to change direction and agree to some of the tough reform demands being made by the bailout monitors.
Several senior officials have privately argued that Mr Tsipras should abandon the far left of his Syriza party and embrace more moderate centre-left groups to form a coalition that could implement new reforms.
Some observers in Athens agreed, saying Mr Flambouraris’s remarks suggested that the premier’s inner circle of advisers were seeking a way to isolate the Left Platform, the party’s radical faction, which supports a “Grexit” from the euro rather than making concessions to the EU and IMF on fiscal and structural reforms.
Opinion polls show an overwhelming majority of Greeks in favour of remaining in the euro. According to one poll published last week, 82 per cent of respondents would back membership of the single currency if it came to a vote.