Greece running out of time as contingency plans are crafted

European officials said Greece is running out of time to unfreeze the aid needed to keep the country afloat as they consider contingency plans should negotiations collapse.

The German Finance Ministry said Wednesday that an aid payment to Greece won’t happen this month and that negotiations between Prime Minister Alexis Tsipras’s government and creditors have failed to progress. Germany is working on a proposal that would allow Greece to stay in the euro in the event of a sovereign default, newspaper Die Zeit reported Wednesday, without citing anyone.

Finance Ministry spokeswoman Friederike von Tiesenhausen said that she could “only shake my head” over reports that the country was making such preparations. “What the government is working on is that the euro region is kept together and strengthened,” she told reporters in Berlin.

European officials are expressing skepticism that there’s enough time to work out a deal ahead of a meeting of euro-area finance ministers at the end of next week in Riga, Latvia, to assess whether Greece has made enough progress to warrant a disbursement from its 240 billion-euro ($254 billion) bailout fund. Leaders are pressuring Greece to submit specific reforms as the country runs out of cash and faces debt payments and monthly salary obligations in the coming weeks.

Yields rise

“This is a complex process and no one in the euro group expects that this could be completed by April 24,” von Tiesenhausen said. “I said last time that there has been progress, but that really there is still a considerable need for negotiations. I checked back today and got the answer that things have not really changed.”

Yields on Greek 10-year notes rose to as much as 12.25 percent today, the highest level in two years. Greek banks’ shares fell as much as 12.8 percent in Athens, reaching their lowest level in at least 20 years.

Data released Wednesday showed Greece fell short of budget targets for last year, prompting new concerns about the cash- strapped nation’s ability to pay bills. The most-indebted state in the euro area posted a budget surplus before interest payments of 0.4 percent of gross-domestic product in 2014, its statistics office said. That compared with a target of 1.5 percent set out as terms of a bailout package.

Enormous pressure

“The economy is already under enormous pressure and there is no clear way through this for Greece,” Richard Jeffrey, Cazenove Capital Management’s chief investment officer, said in an interview today on Bloomberg Television. “I think it would be better for Greece to be outside the system.”

The GDP figures come a day after the European Central Bank was said to have raised the ceiling on Emergency Liquidity Assistance to Greece, leaving the nation’s lenders with a buffer of about 4 billion euros.

Greek banks are being denied access to the ECB’s regular refinancing operations because of the anti-austerity government’s resistance to the terms attached to its emergency loans. Uncertainty over Greece’s future in the euro area has also triggered steep deposit outflows, leaving lenders reliant on emergency cash injections that are subject to weekly reviews by the ECB.

“Greece is moving increasingly close to the abyss,” Slovak Finance Minister Peter Kazimir told reporters in Bratislava. “Nothing can be excluded.” [Bloomberg]

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