Greek Cabinet Prepares High-Risk Talks amid Default Fears

Days before an extraordinary meeting of eurozone ministers and an Europian Union summit, the new Greek cabinet was to meet for the third time in two days to thrash out details of a key policy speech being delivered on Sunday by Prime Minister Alexis Tsipras.

 

With Mr Tsipras and his ministers still adamant that Athens be given more time by creditors to renegotiate its controversial bailout, the speech outlining the new government's legislative agenda will be closely watched around the globe.

 

The government that took office on January 26 promising to end austerity and slash Greece's debt mountain on Friday called for temporary funding from its EU partners, saying it wanted to negotiate a new deal "without pressure and blackmail".

 

The European portion of Greece's massive $275-billion EU-IMF bailout is due to expire at the end of the month and Athens is under pressure to do a quick deal or ask for an extension.

 

With neither move looking likely, credit ratings agencies warned on Friday that Greece was heading closer to defaulting on its loans, a move that could see it exit the eurozone.

 

Standard & Poor's downgraded Greece to just one notch above the range indicating vulnerability to a default, and warned of a "worst-case scenario" where it left the single currency.

 

Moody's said it was placing Greece on review for a downgrade because of "considerable uncertainty regarding the outcome of the ensuing negotiations".

 

The bad news from the ratings agencies came on the heels of goodwill trips by Mr Tsipras and Finance Minister Yanis Varoufakis to London, Berlin, Rome, Paris, Brussels and Frankfurt that wound up with German opposition to debt relief.

 

Germany says it expects Athens to present a plan dealing with debt repayment and economic reforms to a meeting of eurozone finance ministers on Wednesday.

 

Italian Finance Minister Pier Carlo Padoan said the goal at the Eurogroup meeting was not to set up a confrontation with Greece but to "look for shared solutions".

 

Greece will also be on the agenda of the G20 finance ministers meeting in Istanbul on Sunday, while Tsipras will have his first face-to-face talks with German Chancellor Angela Merkel at a European summit in Brussels on Thursday.

 

 

Meanwhile Economy Minister Georges Stathakis today denied a newspaper report that Greece would run out of cash next month, insisting he had been misquoted.

 

"There will be no problem before the summer and an agreement is reached" with European partners, he said.

 

Tax receipts have fallen in the last two months, but Mr Stathakis said measures to address this would be announced on Sunday.

 

Greece is expected to return to growth this year after six years of recession that has left it with sky high unemployment and its economy in tatters.

 

But after the European Central Bank pulled the plug on a key source of funding for Greece's banks this week, the banks -- and by extension the state -- are now reliant on the Frankfurt bank's emergency liquidity funds.

 

Greece is entitled to another 7.2 billion euros in loans under the huge bailout plan first agreed in 2010.

 

But the government says hefty cuts forced under the terms of the deal have crippled the economy, and prefers instead to rip up the programme and start again.

 

While it seeks a new deal, Athens wants 1.9 billion euros of profits made by the ECB from holding Greek government bonds, and permission to issue additional short-term debt.

 

This so called "bridge programme... is an official expression of the will of all sides to negotiate without pressure and blackmail," a government source said Friday.

 

"The final Greek proposals... will be tabled after the bridge agreement."

 

However, the head of the so called Eurogroup, Dutch finance minister Jeroen Dijsselbloem, said Friday: "We don't do bridging loans."

 

Italian Finance Minister Pier Carlo Padoan said the goal at the Eurogroup meeting next week was not to set up a confrontation with Greece but to "look for shared solutions".