Tension rises in eurozone as no Greek deal confirmed

Slow progress and uncertainty over bailout deal with Greece heighten tension in meeting of Eurogroup ministers in Latvia

Updated Jul 28, 2015

The highly anticipated meeting of Eurogroup finance ministers in the Latvian capital Riga Friday ended with a warning, as Greece was unable to make progress towards a bailout deal. As a result, ongoing concerns about a default or even an exit from the euro continue.

Two months have passed since Greece was granted a four month extension on its loan program, however Greece has as of yet failed reach an agreement with its creditors.

Greek Finance Minister Yanis Varoufakis was greeted by 19 frustrated members of the Eurozone. Repetitive discussions of Greece’s repayment schedules left members feeling “tired” and “annoyed.”

After being labeled as an amateur for causing the slow progress of the talks, Varoufakis justified the delays.

"This government does not want to do what previous governments did. Which is to sign on pledges...that were from a macroeconomic perspective impossible to achieve. This is why these negotiations are dragging,” he said.

During the meeting, Chairman of the Eurogroup of Finance Ministers - Jeroen Dijsselnloem - firmly objected to requests of further financial aid.

Athens has been relying on bailout funds ever since 2010. As a result of a lack of reform 7.2 billion euros bailout funds has been frozen and will be unavailable after June.

Until the county speeds up their economic reforms, no further financial aid will be provided by creditors.

Acknowledging that time is running out for the debt burdened country, Dijsselnloem stated that “a comprehensive and detailed list of reforms is needed…a deal is necessary before any disbursement can take place…”

In addition, President of the European Central Bank, Mario Draghi stressed the already fragile situation by stating that “the higher the yields, the bigger the volatility, the more collateral gets destroyed...”

Depending on the solvency of Greek banks, Draghi revealed the ECB may consider haircuts of Greek funding.

Struggling to raise money, Greece is expected to make several payments to the (IMF) and the European Central Bank (ECB) over the next three months.

However, Greece is first expected to use its limited cash reserve to pay a total of 2 billion euros out in the wages and pensions of the country’s public servants by the end of this Month.

The next meeting is scheduled to take place May 11, where further progress will be evaluated a day before the Greek payment of 750 million euros is due to the International Monetary Fund (IMF).

Market Reaction

Despite the meeting being fruitless, European shares rose on Friday due to encouraging corporate earnings and positive economic data.

The pan-European FTSEurofirst 300 index closed up 4 percent.

In addition, Athens’ volatile market rose due to hope for a deal during the Eurozone meeting.

TRTWorld and agencies