Greek finance officials are meeting eurozone creditors in Luxembourg Thursday without the prospect of a debt settlement even as Greece's central bank warned that defaulting in payment could force the country out of the European Union (EU).
Greek Finance Minister Yanis Varoufakis told reporters in Paris on Wednesday he does not believe an agreement on financial reforms could be reached in the meeting with eurozone finance ministers, according to the BBC.
Greece is unable to repay $1.8 billion (€1.6 billion) of a bailout loan owed to the International Monetary Fund (IMF) at the end of June, and is seeking a deal for a fresh $8 billion (€7.2 billion) loan. The European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF) want Greece to agree to introduce financial reforms and more austerity measures, such as pension or wage cuts and tax on more goods and services.
Varoufakis made the statement following the Greek central bank's warning that Greece may exit from the euro and the EU if it defaults in paying lenders.
"A manageable debt crisis, as the one that we are currently addressing with the help of our partners, would snowball into an uncontrollable crisis, with great risks for the banking system and financial stability. An exit from the euro would only compound the already adverse environment, as the ensuing acute exchange rate crisis would send inflation soaring," said the Bank of Greece (BOC) in its Monetary Policy report for 2014-2015, according to TO BHMA.
"All this mean a deep recession, dramatic reduction of income, proliferation of unemployment and the collapse of everything which the Greek economy has achieved since joining the EU, particularly during the euro period. From an equal partner of core European countries, Greece will become a poor country in Southern Europe," said the BOC, according to TO BHMA.
Meanwhile, the head of the U.S. Federal Reserve, Janet Yellen, warned of disruptions in the financial markets and the global economy if Greece doesn't reach a deal with its creditors.
"This is a very difficult situation. In the event there is not an agreement, I do see the potential for disruption that could affect the European outlook and global financial markets," said Yellen during a press conference, according to the Guardian. "There would, undoubtedly, be spillovers to the U.S. that would affect our outlook as well."
IMF's chief, Christine Lagarde, and ECB's president, Mario Draghi, will participate in the meeting with Varoufakis. If no agreement is reached, EU leaders could hold an emergency meeting over the weekend to solve the issue, according to EU Observer.
