Pressure mounts on Greece as its EU creditors play down idea of debt deal

Greece’s European creditors intensified pressure on the indebted nation yesterday, warning the Greek government that a deal is unlikely at next week’s eurogroup meeting in Riga and playing down the prospect of a debt write-down.

Speaking on the fringes of a meeting in New York, German finance minister Wolfgang Schauble indicated that "no one" expected a resolution of the standoff at next week's eurogroup. He also sharply criticised the government of Alexis Tsipras, which took office almost three months ago, for "destroying" the progress made by the previous Greek government.

"It's a tragedy," the German finance minister said. With negotiations continuing in Athens and Brussels on a re-worked bailout deal, Greece is seeking to unlock billions of euro of bailout cash, despite the government reneging on some of the terms of the bailout programme agreed by the previous government.

Greek officials have previously said that they could run out of cash by the end of the month as they struggle to meet regular exchequer payments and debt repayments.

While Greek Prime Minister Alexis Tsipras has vowed to secure a debt writedown for Greece, the head of the euro zone’s rescue fund told a gathering in Washington yesterday that Greece does not need a debt haircut to return to debt sustainability.

Low interest rates "With continued reforms and the continued benefits of this size every year, the country can return to debt sustainability without another haircut," Klaus Regling, the head of the European Stability Mechanism said, noting that Greece was already benefiting from extended debt maturities and low interest rates on bailout loans, worth "billions of euro."

Meanwhile, European Central Bank (ECB) president Mario Draghi said that there was no end date for the provision of emergency funding to Greek banks, noting that it depended on the outcome of talks between Greece and its creditors.

“It’s entirely depending on the conditions that will be in place”after negotiations between Greece and its euro zone partners, the ECB president said at yesterday’s press conference following the ECB governing council meeting.

The European Central Bank again increased the limit on the amount of emergency liquidity assistance it can provide to the Greek banking system, which is now estimated to stand at approximately €74 billion. “We approved ELA and we’ll continue to do so, extend the liquidity to the Greek banks while they are solvent and they have adequate collateral,” Mr Draghi said.

Greece is currently not eligible for the ECB’s quantitative easing programme announced in January.