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Greece Teeters Towards Bankruptcy

  • Henry Ridgwell

Greece’s finance minister said Thursday he wished his country had never joined the euro currency — and warned international creditors that he would refuse to sign any bailout plan that would send Greece into a "death spiral." With a bailout agreement still seemingly a long way off, there are dangers that Athens could run out of money in the coming days.

Hundreds of former employees of Greece’s public broadcaster, ERT, stormed their old workplace earlier this week, after the government voted to re-open the 60-year-old TV station.

The previous government closed it down in 2013 and fired 2600 people — to satisfy spending cuts demanded by Greece's creditors.

Its reinstatement is part of the anti-austerity Syriza-led government’s plans to roll back spending cuts. Former ERT technician Panagiotis Hasapis had mixed feelings.

“After 23 months we enter the building of ERT again, from where the riot police took us out,” he said. “I would like to say I feel like a winner, but this homecoming has a bitter taste,” he said.

Back in recession

Greece’s crisis is far from over. The economy is back in recession. Analyst Raoul Ruparel of the London-based policy group Open Europe blames the prolonged debt negotiations between Athens and the EU.

“Confidence is draining out of the economy as these things drag on,” he said.

Greece made a loan repayment worth $858 million to the International Monetary Fund Monday — but only by tapping emergency reserves held at the IMF itself.

Greek Finance Minister Yanis Varoufakis has warned that the country could run out of cash to pay its bills within the next two weeks. Speaking Thursday, he explained why Greece has rejected EU demands for deeper reforms.

He said that if he signs such a deal, he would be just another finance minister who signed a medium-term fiscal adjustment program while knowing it is not feasible. And math proves that it is not feasible.

Short of cash

Greece must find the equivalent of $2.2 billion by the end of May to pay salaries and pensions. In July and August, Greece must pay US$7.7 billion worth of bonds to the European Central Bank. The consequences of failing to pay would be dire, says Raoul Ruparel.

“If it misses another payment to the IMF, it probably has a bit of leeway," he said. "If it misses some payments of wages and pensions to its citizens, there will be political fallout but maybe less economic fallout. But if it ended up missing a payment to say the ECB in July or August, or a payment on its bonds, then the market impact would certainly be much larger.”

Greeks are bracing for bad news, says Professor Ioannis Kokkoris of Queen Mary University London, who spoke via Skype from Athens.

“People keep withdrawing money. There have been a lot of initiatives to actually try to recapitalize the banks from deposits," he said. "It hasn’t been working so well because of this uncertainty, because we do not know what will happen next Monday and the Monday after and the Monday after that.”

Unless Greece and EU reach a last minute deal, the debt crisis could come to a head in the coming days as the cash finally starts to run out.

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