Greece edged closer to a euro exit after the currency region’s finance ministers said there will be no more talks on financial support unless the Greek government requests an extension of its existing bailout program.
After three weeks of sparring since Prime Minister Alexis Tsipras’s election victory, finance chiefs hardened their positions as negotiations in Brussels ended abruptly on Monday night with Greek Finance Minister Yanis Varoufakis refusing to bow to European demands.
“There won’t be a meeting where we have to listen to how the world is working,” Austrian Finance Minister Hans Joerg Schelling said in an interview Tuesday. “There will be a meeting only where it’s clear, the letter is there, the request is there, the conditions are confirmed.”
Time is running out for Greece: The current aid agreement expires at the end of February. Failure to reach an accord could see Greece run out of cash by the end of March, forcing Tsipras to consider breaking his election promises to end austerity or contemplate the reintroduction of a separate Greek currency.
The yield on Greece’s three-year bonds rose 88 basis points to 18.46 percent at 12:50 p.m in Athens, still short of its 21.1 percent peak last week. Greek stocks fell 2.7 percent. The euro, which lost ground Monday, rose 0.5 percent to $1.1409.
Austrian Chancellor Werner Faymann said some policy makers have underestimated the risk of Greece leaving the currency union and it would have “unforeseen” consequences. Robin Marshall, director of fixed income at Smith & Williamson Investment Management, said a Greek exit is now the most likely option and Commerzbank AG economists Joerg Kraemer and Christoph Weil put the chances of a breakup at 50 percent compared with 25 percent a week ago.
“It is a completely new situation, but the general opinon on Greece leaving the euro zone is more or less relaxed,” Michael Schroeder, an economist at the ZEW institute in Mannheim, Germany, said at a press conference. Still, “we actually don’t know what could happen,” he added.
Talks between Greece and its euro-area creditors ended in acrimony on Monday as officials in Athens accused Eurogroup Chairman Jeroen Dijsselbloem of backtracking on an agreement he made last week with Prime Minister Alexis Tsipras. The Greek government said in an e-mailed statement it was “absurd” and “unacceptable” to demand the country stick to the conditions of its existing bailout when it had been rejected by voters.
“I hope they will ask for an extension of the program,” Dijsselbloem said Tuesday morning. “It really is up to them. We cannot make them, we cannot ask them. We stand ready to work with them.”
Varoufakis said Greece had no choice but to refuse the statement on offer. “In the history of the European Union nothing good has ever come out of ultimatum,” he told reporters after the meeting.
Greece has so far been promised 240 billion-euro ($274 billion) under two bailouts in return for economic reforms and budget cuts enforced by external auditors. Any deal might have set the stage for a follow-on aid program or credit line that would maintain oversight by the European Commission, the European Central Bank and the International Monetary Fund.
Despite the impasse, Italian Finance Minister Pier Carlo Padoan told reporters on Monday night that Greece leaving the euro zone remains “out of the question.”
“I am not worried,” Padoan said. “I am convinced that we will ultimately reach a common ground and a common decision.”
Greece has until the end of this week to reach that decision if it is going to have a financial backstop in place before the current program expires, Dijsselbloem said.
“We’re reaching crunch time for Greece and the euro zone,” U.K. Chancellor George Osborne said as he arrived in Brussels on Tuesday morning. “The consequence of not having an agreement would be very severe for economic and financial stability.”