The UK chancellor, George Osborne, has warned that Britain’s economic stability would be rocked if a deal cannot be reached on Greece’s bailout.
Speaking on his way into the European Union ministers’ meeting on Tuesday morning, Osborne said: “We are reaching crunch time for Greece and the eurozone, and I’m here to urge all sides to reach an agreement, because the consequence of not having an agreement would be very severe for economic and financial stability.”
He added: “What Britain really needs to see is competence not chaos.”
Talks between Greece and its eurozone creditors collapsed in disarray on Monday night, after Athens rejected a plan to prolong its bailout for six months.
Jeroen Dijsselbloem, the chairman of eurozone finance ministers, said on Tuesday morning that eurozone ministers were ready to work with Greece to break the deadlock but insisted that the next move had to come from Athens.
“I hope [Greece] will ask for an extension to the programme, and once they do that we can allow flexibility, they can put in their political priorities,” Dijsselbloem said as he arrived for the meeting.
Analysts at Commerzbank said the chances of Greece leaving the eurozone were now as high as 50%.
After the eurozone finance ministers again failed to reach an agreement with Greece today, the euro membership of the country hangs in the balance.” Before yesterday’s failed meeting, Commerzbank rated the chances of Greece leaving the currency bloc at 25%.”
Greece is not on the official agenda of the meeting, but a further round of talks between Athens and its eurozone creditors is expected to be getting underway. Dijsselbloem has laid down a deadline of Friday for Greece to ask for an extension to its current bailout deal, which is due to expire on 28 February.
The Greek finance minister, Yanis Varoufakis, reiterated his belief that a compromise was possible, but refused to give ground on Greece’s main argument against austerity.
Europe will continue to deliberate in order to enhance the chances of actually achieving a very good outcome for the average European, not for the average Greek, not for the average Dutch person, or the average German. We know in Europe how to debate in such a way as to create a very good solution, an honourable solution, out of initial disagreements.”
He repeated Syriza’s long-held position that the EU needs an alternative to austerity. “Investment is the main game in Europe. It is what is going to beat the deflationary forces which are blowing ill winds everywhere in the continent.”
But with neither side budging from their entrenched positions on the future of Greece’s €240bn bailout (£178bn), European markets moved lower. Greece’s main index fell 2.5%, after an initial near 5% fall with shares in some banks down by 9%. The main stock markets in France and Germany were down around 0.7%, although the FTSE100 was little changed.
Luxembourg’s finance minister, Pierre Gramegna, said both sides would have to make concessions. “We can’t remain in a blockade so everyone has to move a bit, water-down demands so we can find a compromise.”
