The euro area’s largest economies told Greece its efforts to get more aid will come to nothing if the debt-swamped nation doesn’t overhaul its finances.
With the clock ticking on the country’s bailout arrangement, European policy makers who gathered in the German city of Dresden for a Group of Seven meeting warned a deal to unlock a further loan disbursement was still not in sight after months of negotiations.
“The red line is that there cannot be a deterioration of the overall budget situation, and in fact there needs to be an improvement,” French Finance Minister Michel Sapin said in an interview with Bloomberg at the G-7 on Friday. Bailout talks “are progressing faster but not yet fast enough to conclude.”
Five years after Europe and the International Monetary Fund first bailed out Greece, officials are again facing a potential debt default by the Mediterranean nation. German Finance Minister Wolfgang Schaeuble, who hosted the event, signaled growing irritation with Greece by warning that policy makers need to consider Europe’s broader future, and his U.S. counterpart Jacob L. Lew urged all sides to resolve the impasse.
While Greece has “a very big problem,” the euro area’s obligations to Europe are also very large, Schaeuble told reporters at the end of the meeting. “We are doing everything to meet this responsibility, but it’s not only a responsibility for one country.”
European stocks declined for a second day amid investor concern the payment will be missed. The Stoxx Europe 600 Index was down 0.9 percent at 4:20 p.m. German time. The yield on Greek 10-year bonds was at 11.29 percent. It has dropped since May 22, with the bonds set for their first weekly gain since the end of April. The yield climbed as high as 13.93 percent last month, the most since 2012.
Greece dominated public comments at the G-7 and muscled in on an agenda that was supposed to focus on economic growth, tax and financial architecture.
Negotiations between the country and the institutions that led its rescue have stumbled over issues including reform of Greek pensions and labor markets and its budget surplus. Creditors say the government in Athens must present a list of credible pledges before they’ll consider disbursing the country’s final bailout installment under an arrangement that expires at the end of June.
Greece hasn’t yet said how it will pay almost 1.6 billion euros ($1.74 billion) in IMF payments scheduled for next month. The first transfer is due June 5, marking it as a potential deadline for a deal unless Greece makes the repayment or finds a legitimate way to postpone it.
“There’s the possibility that June 5 is not the real deadline, that there’s a later date in June,” Lew told reporters. “There’s been some discussion about the possibility of bringing some of the payments to a later date.”
Under IMF policy, Greece can bundle the four payments due next month and make them all together on June 19. IMF spokesman William Murray said on Thursday that Greece hasn’t requested a bundling of payments.
Lew urged the Greek government to come up with a “credible plan” to unlock financing from its creditors and said that both sides needed to compromise.
In a sign of growing urgency in the negotiations, Greek Prime Minister Alexis Tsipras held a one-hour call with German Chancellor Angela Merkel and French President Francois Hollande on Thursday, according to a Greek government official.
European Commission President Jean-Claude Juncker said the dispute was discussed at Friday’s EU-Japan summit.
“This issue, which is a very difficult one, will be solved in the next coming days and weeks,” he told reporters in Tokyo.
Euro-region finance ministers were told by their leaders to conclude negotiations in next few days, Spanish newspaper El Mundo newspaper reported, citing a senior diplomat with knowledge of the talks it didn’t name.
The IMF won’t support a bailout accord unless Greece commits to a credible medium-term primary budget surplus and changes to its pension system, an official involved in the G-7 talks said on Thursday on condition of anonymity because the discussions are confidential.
While Tsipras must make binding commitments, euro-area countries may also need to offer debt relief as part of any solution, the official said.
The tussle with Greece is only over its current bailout, and that needs to be settled before any third aid plan can be considered, European economic commissioner Pierre Moscovici said in a Bloomberg interview.
“We first need to close the review of the second program, to conclude the program, and then we’ll be capable of talking about further arrangements,” he said. “Let’s not confuse those two problems.”