Exclusive: Euro zone formally discusses Greek default for first time

Fri Jun 12, 2015 8:30am EDT
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By Jan Strupczewski

BRUSSELS (Reuters) - Senior EU officials have formally discussed for the first time a possible Greek debt default as negotiations between Athens and its creditors have stalled ahead of an end-month repayment deadline, several officials told Reuters.

The government representatives, preparing next week's Eurogroup meeting of euro zone finance ministers, concluded at talks in Bratislava late on Thursday that there were three possible scenarios for what would happen with Greece at the end of June. The least likely, they think, is a successful cash-for-reform deal next week in time to meet end-June legal deadlines.

The second possibility was a further extension of the current bailout program, which expires this month at the same time as Greece must repay 1.6 billion euros to the IMF. The third -- discussed formally for the first time at such a senior level in the EU -- was to accept Greece could default.

The meeting reached no decision or concrete conclusion.

Most officials argued that it was unlikely that creditors would strike a deal on reforms with Athens in time to disburse the 7.2 billion euros that remain available to Greece under a rescue program extended in February for four months.

"It would require progress in a matter of days that has not been possible in weeks. The reaction of the ECB, the IMF and several member states was extremely skeptical," one official familiar with the discussions said on Friday.

The Greek representative at the meeting said Athens would do everything to reach a deal in time, other officials said. That would in effect mean an agreement in time to be endorsed by the Eurogroup when it meets in Luxembourg late on June 18.

Officials said, however, that even then, disbursement of loans to Athens by June 30 would be very difficult because of the time needed to finish all the legal procedures necessary.   Continued...

A European Union flag (L) and a Greek national flag flutter at the entrance of the Bank of Greece headquarters in Athens June 11, 2015. REUTERS/Yannis Behrakis