No deal between greece and creditors as another deadline passes

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On Thursday, finance ministers of the 19-nation euro bloc met in Luxembourg but failed to reach agreement on Greece and its debt crisis.

No agreement was reached even though it is only 12 days before Greece is due to repay $1.8 billion that it owes to the International Monetary Fund (IMF). Eurozone leaders are to hold another emergency meeting on Monday in another attempt to avert a Greek default. Jeroen Dijsselbloem, who is chair of the Eurogroup said after the Thursday meeting: "Regrettably ... too little progress has been made. No agreement is in sight."

The uncertainty as to whether a deal can be reached is causing a run on Greek banks with over 2 billion Euros being withdrawn between Monday and Wednesday this week. The run on the banks may force Greece to impose capital controls as the withdrawals are far outpacing the emergency liquidity assistance (ELA) being provided to the banks.  

European Central Bank board member Benoit Couere said that he did not know if Greek banks would be open on Monday. The IMF has warned that if the payment due at the end of the month is not made Greece will be considered in default. The Greek central bank head has warned that if Greece defaults it could be an economic catastrophe. Others argue that Greece should leave the euro zone and introduce its own currency.

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This is the only way in which it can become independent again and able eventually to introduce programs that the people desire rather than Greece's creditors. There is no doubt there would be considerable painful adjustments to be made but recovery could come rather quickly as the low value of the Greek drachma will encourage tourism and exports.

So far there is little sign the Tsipras or Varoufakis the finance minister, are planning to default and exit the euro zone. Tsipras appears to remain optimistic that a deal can be reached. However, with the flight of cash out of Greek banks and a horrendous 24.6 per cent fall in revenues in May it would seem that Greece might be so desperate to reach a deal that it will give up its few remaining "red lines" such as pension cuts and labor market reforms.

Nevertheless Tsipras said: "The blind insistence of cuts (in pensions) in a country with a 25 percent unemployment rate and where half of all the young people are unemployed will only cause a further worsening of the already dramatic social situation." Many economists would agree but that matters little. What counts are the demands of creditors. If they are not met, there will be no deal. The Greek government may think that the creditors will allow more leeway since they will end up losing billions if Greece defaults but that gamble may turn out to be quite wrong. 

Some think that Russia might come to the aid of Greece. However the Russian deputy finance minister said that there had been no request for funds from Greece and that in any event Russia lacked the resources to bail out Greece.

As with Tsipras, German chancellor Merkel thought a deal was still possible and said to German lawmakers: "I'm still convinced: where there's a will, there's a way. If those in charge in Greece can muster the will, an agreement ... is still possible." There is strong resistance in Germany to providing any further funds to Greece and a slim majority are in favor of Greece leaving the euro zone.

Saturday morning BBC News is reporting German Chancellor Angela Merkel has warned there must be a deal between Greece and its creditors ahead of Monday's emergency EU summit.

Additional Sources:
http://uk.reuters.com/article/2015/06/19/uk-eurozone-greece-idUKKBN0OW18Q20150619
http://www.nytimes.com/2015/06/19/business/international/greek-debt-talks-are-again-fruitless.html?_r=0
http://www.politico.eu/article/greece-must-leave-the-euro/