Talks between Greece and its creditors resumed in Brussels on Thursday, with both sides still far apart on an agreement needed to keep Athens in the euro area.
Negotiators on both sides failed to reach an agreement over the weekend in time for the Eurogroup meetings. The Greek government vowed last week it would not sign off on any agreement that would breach its campaign promises. These “red lines” include provisions related to pensions and wages.
Greece’s creditors – the International Monetary Fund, European Central Bank and European Union – are refusing to hand over a critical bailout tranche until Athens shows it is willing to implement several economic reforms. Greece tapped into emergency funds earlier this week in order to make a €750 million payment to the IMF.
The Greek government must pay out billions of euros in wages and pensions later this month before making another debt payment to the IMF in June.
Greek finance minister Yanis Varoufakis remains committed to his party’s “anti-austerity” pledge, telling a conference in Athens he would not sign off on any agreement that would push Greece to the brink of economic peril. Some analysts have speculated that Varoufakis may step down if he is not presented with a viable agreement allowing the Greek government to hold true to its electoral promises.
Greece plunged back into recession in the first quarter, the European Commission reported on Wednesday, despite broad improvements elsewhere in the euro area. Gross domestic product in Greece fell 0.2% in the first quarter, following a contraction of 0.4% in the final three months of 2014. The European Commission defines a recession as two or more successive quarters of contractions in GDP.
The broader Eurozone expanded 0.4% in the first quarter, following a 0.3% expansion in the fourth quarter of last year. Compared to year-ago levels, the Eurozone economy expanded 1%. All four of the Eurozone’s largest economies – Germany, France, Italy and Spain – reported growth in the first quarter. That was the first such occasion since 2010.
Athens has until the end of June to reach an agreement with creditors that would stave off a devastating default and keep Greece in the 19-member currency union. As the clock ticks down, the prospects of an agreement appear dimmer, leading many to speculate that Greece’s days in the Eurozone are numbered.