Greece’s fate hangs in balance amid contagion fear

As negotiations between Greece and its international lenders drag on, and the country’s much-needed financial aid hangs in the balance, euro zone finance ministers told CNBC that the outcome of ongoing discussions was uncertain.

Fears have grown that Greece is running out of money and could even default on its forthcoming debt repayments to lenders, the International Monetary Fund (IMF) and European Central Bank (ECB). This could, in turn, lead to Greece could leave the 19-country euro zone – something that many in Europe are keen to avoid.

Such an event could precipitate financial chaos in Greece and could damage the integrity of the single currency, the long-term viability of the region and, potentially, hamper its economic recovery.

Speaking to CNBC at the IMF’s spring meeting in Washington, euro zone finance ministers were keen to avoid discussing the possibility of a Greek exit from the euro zone – or “Grexit” – but did admit that the situation was “unstable” and the outcome of talks with creditors uncertain.

“I do not even want to discuss the possibility of the Greek situation taking a turn for the worse,” Harris Georgiades, finance minister of Cyprus, told CNBC Friday, adding that he wanted to be optimistic that a deal would be reached.

“I feel that the commitments of the new Greek government to the reform program have to be noted, and hopefully this will create the foundations for a resolution of what is currently an unstable situation.”

Since Greece’s left-wing government came to power in January, the future of the country’s bailout program has been hanging in the balance. To date, the country has received two financial aid packages – worth a total of 240 billion euros ($258 billion) – but the reforms required by lenders have been rejected by the Greek government, throwing the entire program into doubt.

The Eurogroup of euro zone finance ministers is due to meet on April 24 to discuss the reforms needed in return for further aid. In February, the group agreed to give Greece’s bailout program a four-month extension.

Eurogroup President, Jeroen Djisselbloem, told CNBC that Greek Prime Minister Alexis Tsipras had to make tough choices that might not be popular with the Greek people who are fed up with austerity measures.

“I think Prime Minister Tsipras has a very strong mandate and still a very high level of trust in his country and sometimes, as a politician, you have to use the mandate you have,” the Dutch finance minister said.

“You must sometimes lead your people into a future, even if that means taking tough measures in the short term. (But) there has to be a longer-term perspective.”

CNBC

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Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.