Drawn-out negotiations between Greece and its creditors is damaging the economy and has led to further cuts in Greece’s credit rating, which was already at junk-bond status.
On Wednesday (April 15th), Standard & Poor (S&P) warned that the country was at substantial risk of a default.
A spokesperson for S&P said that without significant economic reform or further relief, they expect Greece’s debt and other financial commitments to be unsustainable. The ratings agency cut Greece’s rating from B-/B to CCC+/C.
Currently, interest rates on two-year Greek bonds are about 24 per cent. This indicates that investors expect the country’s debt burden to be eased or that there will be a default.
Since January, the Greek government has been in dispute with the International Monetary Fund, the European Central Bank and the European Union.
The country’s anti-austerity government, led by prime minster Alexis Tsipras, has been at a standoff with creditors over releasing the final instalment of bailout aid.
European finance ministers are meeting in Riga on April 24th. If Athens is unable to submit a revised economic plan, eurozone finance ministers may not provide Greece with the financial help it needs to pay its debts.
Slovak finance minister Peter Kazimir is not optimistic about a deal before the meeting in Riga, the Guardian reports.
“Given we have lost a lot of time, I am sceptical,” he said.
“Greece is moving ever closer to the abyss,” he warned.
Wolfgang Schaeuble, Germany’s finance minster is also pessimistic about a deal being reached.
Speaking to Bloomberg Television interview on Wednesday, Mr Schaeuble said that another debt restructuring was no longer an option. He also said that Greek demands for war reparations from Germany were not realistic.
Greece has repeatedly asked for funds from Germany – most recently citing a sum of €278.7 billion (£200.33 billion) for occupation and atrocities committed during the second world war.
This is almost the equivalent of Germany’s annual budget. International courts have already ruled against these demands and Shaeuble says the continued argument doesn’t advance the goal of stabilising Greece.
“Today, the issue for Greece is reforming its economy in such a way that it becomes competitive at some point,” he explained.