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Greek deal unlikely as pressure mounts

June 18, 2015

With Greek government and international lenders deadlocked in the bailout dispute, chances of a breakthrough ahead of the Thursday meet of eurozone ministers seem remote.

Symbolbild Griechenland Schuldenkrise
Image: Reuters/Y. Behrakis

The Dutch finance minister and Eurogroup chief Jeroen Dijsselbloem said that his eurozone colleagues would not be too flexible in their demands on Greece, when they meet in Luxemburg on Thursday.

"If we conclude a deal that undermines the credibility of the eurozone, then that will explode in front of our eyes," he said.

Greece has to pay 1.6 billion euros to the IMF before the end of the month and needs a deal to unlock 7.2 billion euros (8.1 billion dollars) remaining in the bailout by the international partners.

If the talks fail, Greece would face a default and the prospect of leaving Eurozone.

Athens and European officials have traded blame for the stalled negotiations, with Greece's leftist government refusing to cut pensions for a cash-for-reforms deal.

Even if the deal is reached on Thursday, it would have to be confirmed in several national parliaments, putting ever increasing pressure on Athens to conform to the demands.

However, several officials, including Greece finance minister Yanis Varoufakis, said they didn't believe a breakthrough would be reached during the meeting of finance ministers in Luxemburg.

"I don't think so. Now it is up to political leaders to arrive at an accord," Varoufakis said during a visit to Paris late Wednesday.

On Tuesday, prime minister Alexis Tsipras accused the creditors of trying to "humiliate" his country, for saying his reform proposals were insufficient.

Grexit drawing near

With the deadlines looming, the idea of Greece leaving the euro is getting more and more attention in European financial institutions. Eurozone officials have started drawing up backup plans, according to German media. Officials in Brussels are also considering contingency plans if the talks fail.

Jens Weidmann Präsident der Deutschen Bundesbank beim ECOFIN in Mailand
Jens WeidmannImage: picture-alliance/dpa

"There are of course some discussions also on less favourable scenarios," European

Commission Vice President Valdis Dombrovskis said.

The head of Germany's central bank, Jens Weidmann, said that the so-called "Grexit" would not destroy the eurozone.

"A Grexit could change the character of the monetary union," he said in an interview with French, Italian and Spanish media. "But this also changes when individual countries do not live up to their responsibilities to ensure a stable currency."

Tsipras to visit Putin

Greek central bank also warned of "uncontrollable crisis" on Wednesday, and urged Prime Minister Tsipras to compromise on the bailout issue, angering the members of his Syriza party.

On Thursday, during the ministers' meeting in Luxembourg, Tsipras will visit the Sankt Petersburg International Economic Forum, and is scheduled to talk to President Vladimir Putin on Friday. Observers believe it could be a message to Europe that Greece can turn to help elsewhere.

dj/jil (Reuters, AFP, dpa)