Lenders respond to Greek optimism with threats of Grexit, default and want more!

A barrage of comments by representatives of Greece’s international creditors (European Commission, European Central Bank, International Monetary Fund) on Thursday indicate that a solution may not be as close as Greek officials have stated. Contrary to Radical Left Coalition (SYRIZA) Government Spokesman Gavriil Sakellaridis’ optimism for a deal by Sunday, International Monetary Fund Chief Christine Lagarde was just one of a number of officials who stated that more progress is needed.

Comments by representatives of the IMF, European Commission and European Central Bank show that despite assurances from Athens about a deal within reach, the reality of talks is that they appear to be going nowhere with deadlines bein postponed for as long as SYRIZA resists key reforms to its “red lines” (pension cuts, labor market changes etc.)

Speaking to German newspaper FAZ on the sidelines of the G7 summit in Dresden, Lagarde did not rule out a Grexit, though she clarrified that she was not referring to a “possibility” but the “potential” of one that would not bring about “the end of the euro.” She underlined that more progress was needed and that it was unlikely that there would be an agreement with Athens soon. Lagarde’s viewpoint was backed by similar statements made by European Economic and Monetary Affairs Commissioner Pierre Moscovici and European Commission Vice President Valdis Dombrovskis.

Speaking to France Culture, Moscovici expressed the viewpoint that an agreement with Greece was still possible but it was “not accurate to say that we have covered three quarters of the distance” towards reaching it. He admitted that there was “some progress” with negotiations with the Brussels Group but there was still a long way to go.

Dombrovskis said that the Brussels Group is continuing its negotiations on matters such as VAT, pension, the labor market and public administration.

Meanwhile, the European Central Bank issued a warning in its Financial Stability Review stating that danger of a Greek default had increased dramatically with “Euro area systemic stress has remained low over the past six months”.