Dresden, Germany: Greece’s debt crisis dominated talks of the Group of Seven finance ministers on Friday, with the United States and Japan pressing Europe to reach a deal with Athens to avoid rattling the Eurozone and the global economy.
Even though Greece was not on the official agenda of the three-day meeting in Dresden, it was a key topic as time runs out for Athens to reach an agreement with its international creditors.
“All parties need to move,” US Treasury Secretary Jack Lew told reporters after the meeting wrapped up Friday.
“There needs to be some flexibility on the part of the institutions,” namely the European Central Bank, the International Monetary Fund and the European Commission, Lew said.
The three lenders are demanding that the Greek government push through economic reforms in return for bailout funds.
There was a “broad view” among the meeting participants that “Greece needs to make very tough decisions,” the US finance chief continued, while adding that “one won’t happen without the other.”
Washington had “delivered the same message to all participants,” Lew said.
“Everyone agrees that resolving this without crisis would be in interest of everyone and the global economy.”
Representatives of the key actors in the Greek discussions — IMF chief Christine Lagarde, ECB president Mario Draghi and the EU’s commissioner for economic and monetary affairs Pierre Moscovic — all attended the Dresden talks, held to prepare for a wider summit of G7 leaders starting June 7.
No ‘Grexit’ scenario
Lagarde had caused a flurry the day before by saying in a newspaper interview that a so-called “Grexit” — or Greek exit from the Eurozone — was “a potential.”
The IMF subsequently scrambled to clarify her comments by saying Lagarde hoped it was a scenario “the Europeans will not have to face because hopefully they will find a path to agree with the future of Greece within the Eurozone.”
French Finance Minister Michel Sapin insisted: “There is no Grexit scenario.”
There had been “progress” in the negotiations, but “results are still insufficient so far,” Sapin said.
The meeting’s host, German Finance Minister Wolfgang Schaeuble, also sought to play down assertions by Athens that Greece is on the verge of reaching a deal with its creditors.
“The positive reports out of Athens don’t fully reflect the state of talks,” Schaeuble said.
After four months of negotiating to unlock some 7.2 billion euros ($7.9 billion) in remaining bailout cash, Athens’ coffers are near empty.
Mixed signals
The Greek government has sent mixed signals about how close the two sides are to a deal. On the one hand it has suggested that an agreement could be reached by Sunday.
But Finance Minister Yanis Varoufakis told VimaFM radio on Friday that while a deal was close, under a February agreement “the country’s aid programme was prolonged until June 30, thus that is the date by which we need to arrive at a deal.”
If Varoufakis sees the end of June as the ultimate deadline for a deal, this would offer Athens and its creditors a longer time frame to conclude their talks than next week, when Greek officials have said they may not have enough money to make a repayment to the IMF.
The governor of the Bank of Japan Haruhiko Kuroda warned of the consequences of a possible “Grexit”.
“If for the first time a country leaves the Eurozone, then it won’t be the same stable monetary union as before,” Kuroda told the business daily Handelsblatt.
In fact, the euro area would then simply resemble a system of fixed exchange rates and such systems had never proven particularly successful in the past, the central bank chief said.
Nevertheless, Kuroda said he did not believe there would be any contagion effects “in the short term if Greece defaults or even leaves monetary union.”
That would “manageable,” he said.
Yuan ambitions
Among the official topics on the agenda were the state of the global economy, financial regulation, fighting tax evasion and ways of starving jihadist groups like the Islamic State of funding.
The Chinese currency, the yuan or renminbi, also featured in discussions, as Beijing continues to push for it to play a greater role in the world financial system.
It wants the yuan to be included in the basket that makes up the IMF’s own “special drawing rights” reserve currency.
Meeting host Schaueble said there was fundamental agreement that this should be the case, but he added that “there are technical issues and not just technical ones” to sort out first.
“It would not be good to rush it,” he added.
