Greece gives further ground to creditors as Bank of England warns of risk to UK stability

1st July 2015


The Greek government has agreed to accept most of the conditions set by its creditors as the Bank of England warns that the country’s debt crisis poses a risk to the financial stability of the UK economy.

Greek Prime Minister Alex Tsipras says he will accept most of the terms set by the country’s creditors in a letter to the European Commission, European Central Bank and International Monetary Fund.

In the letter Tsipras says he is willing to accept the new VAT system proposed by creditors, but he wants to keep a 30% discount for the Greek Islands which creditors want to see scrapped.

On pensions, Tsipras has agreed that an “Ekas” top-up grant for 200,00 low-income pensioners will be phased out by 2020, but he is not willing to accept an immediate cut to this top-up for the wealthiest 20% of recipients.

On defence, Tsipras says he will reduce the cap on military spending by €200m in 2016 and €400m in 2017, but creditors have asked for an earlier reduction of €400m.

Speaking at the launch of the latest Financial Stability Report today, Bank of England governor Mark Carney said the outlook for UK financial stability “has worsened” following the crisis in Greece.

The risks Carney cited in relation to Greece include a reduction in the risk appetite of businesses and a knock-on effect on households, according to the BBC.

However, Carney said the UK only has “minimal” direct exposure to Greece and is “relatively well insulated”.

However, he warned that  “our economic and financial exposure to the euro area is considerable. Fortunately, the euro-area economy is stronger than a few years ago.”

The news has raised investors’ hopes that Sunday’s referendum will now be cancelled and a third bailout deal agreed. Yet the German chancellor, Angela Merkel has said no new bailout talks would be possible before Greece holds a referendum on Sunday, that will ask Greeks if they want to accept their creditors’ proposals.

The Greek government missed the deadline to repay €1.5bn (£1.1bn) to the International Monetary Fund (IMF) yesterday evening, hours after its eurozone bailout expired.

After its eurozone bailout expired, Greece could no longer afford to meet its IMF repayment. It is not technically in default for another month.

Eurozone ministers refused to extend the bailout but they have agreed to consider a last-minute request for a new two-year rescue plan for Greece, amid rising fears that the country may leave the single currency.

Gerry Rice, a spokesman for the International Monetary Fund (IMF), says:  “I confirm that the SDR 1.2 billion repayment (about EUR 1.5 billion) due by Greece to the IMF today has not been received. We have informed our executive board that Greece is now in arrears and can only receive IMF financing once the arrears are cleared.

“I can also confirm that the IMF received a request today from the Greek authorities for an extension of Greece’s repayment obligation that fell due today, which will go to the IMF’s executive board in due course.”

The European Central Bank (ECB) has also frozen its liquidity lifeline to Greek banks, according to the BBC.

Eurogroup chairman and Dutch Finance Minister Jeroen Dijsselbloem earlier said it would be “crazy” to extend the bailout while the Greek government was refusing to accept the austerity measures proposed by its creditors.

* A UK-based marketing manager has launched a crowdfunding campaign on Indiegogo to raise funds for a Greek bailout. Thom Feeney tweeted: “Decided to solve the Greek Debt Crisis via crowdfund. All I need is for everyone in EU to buy a Feta and Olive salad …

So far he has raised €589,015, but this is less than 1% of the sum Greece needs.

For a donation of €3, crowdfunders are promised a postcard of the Greek Prime Minister Alex Tsipras and for €6 an olive and feta salad.

Unfortunately, if the campaign does not raise its €1,600,000,000 target within six days, the websites rules mean the fundraising will be cancelled and all money returned to backers.

– See more at:

Leave a Reply

Your email address will not be published. Required fields are marked *