France showed its true colours yesterday (8 July) when Manuel Valls said that a Greek exit from the eurozone would be an admission of the European Union’s impotence.
Socialist Prime Minister Manuel Valls told parliament in Paris: “Keeping Greece in the euro and therefore in the heart of Europe and the EU is something of the utmost geostrategic and geopolitical importance.” To let Greece go would be “an admission of impotence”, he added.
The French position contrasts with that of Germany, where leading politicians are saying that a better solution would be to let Greece leave the eurozone, and join it again in four-five years.
In fact, France and Germany are divided over the issue of a possible Greek debt “haircut”. Paris is in favour of granting a debt relief for Athens, while Germany strongly opposes any solution which would lead to the loss of money Berlin has lent to Athens.
The International Monetary Fund (IMF) and the USA agree with the French position. Fund chief Christine Lagarde, a former French economy minister, reiterated yesterday that Greece’s massive debt would need restructuring.
“Greece is in a situation of acute crisis, which needs to be addressed seriously and promptly,” she said at the Brookings Institution think tank in Washington.
US Treasury Secretary Jack Lew also called on Europe to be ready to restructure Greece’s debt.
In a separate intervention, Lew said that Greece needed to create the conditions so that Europe would restructure the debt “in a way that is more sustainable”.
Sources told EURACTIV that the Greek walkout from the talks on 26 June, when positions are reported to have been very close, is due to the fact that the creditors’ proposal didn’t contain any provision on debt relief.
Any opening toward a debt haircut could be interpreted as a major victory of Tsipras, who would really have reinforced his positions following the 5 July referendum, in which more than 61% of Greeks rejected the creditors’ proposals of 26 June.
Greece is faced with a midnight deadline tonight (9 July) to submit new reform plans to unlock a third bailout desperately needed to keep its struggling economy afloat and stop it crashing out of the euro.
Greece has had two international bailouts worth €240 billion since 2010, the last of which expired on 30 June.
Greek Prime Minister Alexis Tsipras vowed on Wednesday to present “credible” plans to seal more emergency loans from his exasperated European creditors ahead of a summit of all 28 EU leaders on the debt crisis on Sunday.
“The Greek government will tomorrow file new concrete proposals, credible reforms, for a fair and viable solution,” Tsipras told lawmakers at the European Parliament in Strasbourg.
Depending on the Greek reform plan, Eurogroup ministers meeting on Saturday will be in a position to recommend a loan, and some emergency bridging finance, which a full summit of the 28 EU leaders would approve on Sunday (12 July) if they are satisfied with Greek reform commitments.
Despite the last-minute efforts to conjure up a deal, a Reuters poll of economists found the probability of Greece leaving the eurozone had risen to 55% from 45% last week, the first time it was deemed more likely than not.
In the meantime, it became known that the Greek banks had enough liquidity in cash machines to serve the public until Monday (13 July). It remains unclear what will happen after.
Greek authorities have extended a shutdown of the country’s banks until Monday, restricting cash withdrawals to €60 per day.