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Eurozone, Greece face off in difficult talks
April 20, 2015, 12:07 am

Greek Finance Minister Yanis Varoufakis has in the past week exchanged strong words with German Bundesbank chief Jens Weidmann who accused Athens of losing Europe's trust [Xinhua]

Greek Finance Minister Yanis Varoufakis has in the past week exchanged strong words with German Bundesbank chief Jens Weidmann who accused Athens of losing Europe’s trust [Xinhua]

It will be a difficult week ahead for Athens and the European Central Bank (ECB) as a deadline for an agreement on Greek debt restructuring fast approaches.

Making things more difficult is growing European market speculation – or fear – that no agreement will be reached before the April 24 meeting (deadline) of eurozone finance ministers.

This, therefore, raises the possibility that Greece could default on its loans.

If that happens, Greece could withdraw from the eurozone and send global markets into a spiral.

Greece is scheduled to repay some $806 million of its overall $3 billion debt by May 12. The remaining $2.2 billion is due to be paid by July.

The repayment would ensure that Greece continues to receive bailout loans of $7.2 billion from the International Monetary Fund (IMF) and the ECB.

But the Greek leftist government, which won the January general elections largely on a platform promise to aggressively restructure its ECB and IMF bailout debt, has previously indicated that it wanted a delay in repayment schedules.

It has said that it wants a political – rather than financial – solution and insists any negotiation over Greek economic reform should be considered at the heads of state level, not among finance ministers.

In the meantime, Athens is hoping for an interim agreement with its creditors to be reached before eurozone finance ministers meet in Riga, Latvia on April 24.

This agreement would allow it access to the additional $7.2 in bailout funds it needs to keep the bureaucracy running without committing to stringent economic reforms – such as an overhaul of the pension system – demanded by the EU.

Greek Prime Minister Alexis Tsipras is part of the new leftist government that was swept to power in snap elections in January largely riding a wave of popular discontent against the austerity measures that were set as preconditions for the bailout agreement with the EU since 2009.

Tsipras has repeatedly said that Greece wants a fiscal space to be able to renegotiate a restructuring of its debt with European partners.

“The more our [EU] partners want austerity, the more the problem with the debt will get worse,“ he has previously said.

Tsipras says he will raise minimum wages, cut taxes, and rehire public workers fired when the ECB and IMF imposed a cap of 150,000.

But the ECB is unlikely to budge.

Former Latvian Prime Minister Valdis Dombrovskis says Athens won’t get the money it needs in the interim because the ECB believes Greece is not doing enough on the reforms it needs to carry out.

“In order to receive funds, Greece needs to demonstrate sufficient progress as regards its structural reform efforts. There is no way around it. Now it is the last moment to start working more intensively,” Dombrovskis told Reuters last week.

He also said that Greece has made insufficient progress to influence the April 24 meeting to conclude that the ECB should release bailout funds.

On Friday, the IMF warned that current requirements of Athens may be too stringent and called for the ECB to scale back its demands.

The IMF warning came amid strong words exchanged between Greek Finance Minister Yanis Varoufakis and Germany’s Bundesbank chief Jens Weidmann over the impasse.

The BRICS POST with inputs from Agencies

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