European Central Bank President Mario Draghi on Saturday rejected speculation that Greece may be forced to abandon the euro, reiterating that Europe΄s single currency is irrevocable.
At a news conference during meetings here of the world΄s top finance officials Mr. Draghi said he stood by a comment he made in August 2012 that the euro “cannot be reversed.”
The risk of a Greek exit appears to be rising, as a stalemate between Greece and its creditors over emergency financing drags on, with some big bills falling due for cash-strapped Athens in coming weeks.
Despite the urgent circumstances, the International Monetary Fund΄s Managing Director Christine Lagarde on Saturday said she had learned little new in talks with Greek Finance Minister Yanis Varoufakis this week and instead urged him promptly to submit a detailed proposal for a fresh bailout.
“What we very much hope…is not only speeding, but deepening the work,” she said. “It΄s not a question of racing to the end, it΄s a question of doing all the work that needs to be done.”
After a series of meetings in recent days between Mr. Varoufakis, the IMF and his counterparts from the U.S. and Europe, senior officials sounded increasingly frustrated that Athens hasn΄t put forward a detailed plan to overhaul its government finances and restore Greek economic growth in a way that would encourage bailout lenders to unlock financing the debt-ridden country needs to avoid default.
The recently installed left-wing government continues to resist overhauls in a number of areas, including further changes to Greece΄s pension system and labor market to which its predecessors had agreed in 2012.
“The job of the finance minister…is to go deep in the analysis, pull out the numbers, assessing the efforts undertaken, making a few hypotheticals about what it will deliver in terms of growth, in terms of fiscal revenues, or spending, and then move on,” Ms. Lagarde said.
Meanwhile, German Finance Minister Wolfgang Schäuble damped hopes for a breakthrough in the Greek situation at a closely watched meeting of eurozone finance chiefs in Riga, Latvia, next week. “It doesn΄t look like there will be a solution in Riga,” the German minister said. “It is clear of course that things have got worse and it΄s difficult for Greece.”
Mr. Schäuble said the onus remains on Greece to commit to overhauls in return for sustained aid, based on the Feb. 20 agreement to extend Greece΄s bailout by four months. “The debate isn΄t getting better by repetition,” he said. “The time lapse means Greece can΄t access the outstanding funds.”
A senior IMF official on Friday said negotiations over fresh emergency financing for Greece are likely to take several more weeks, even though the cash-needy government in Athens requires a deal to help it meet a big increase in debt payments due in June.
The ECB΄s Mr. Draghi said in 2012 “there is no going back to the lira or the drachma or to any other currency. It is pointless to bet against the euro. It is pointless to go short on the euro.”
On Saturday, he said he would “say exactly the same words today.”
A Greek default on its debts would in turn threaten the country΄s banks and make it harder for the ECB to approve emergency lending via the Greek central bank.
Mr. Draghi declined to say how the ECB would react to any Greek default, saying: “I don΄t want even to contemplate” such a scenario. “We all want Greece to succeed,” Mr. Draghi said, adding, “the answer is in the hands of the Greek government.”
But not all finance officials sounded so confident. Italian Finance Minister Pier Carlo Padoan said earlier in the week that Greece΄s cash crisis could push the country into an unintentional exit from the eurozone.
Poul Thomsen, head of the IMF΄s European Department and chief architect of Greece΄s bailout programs, said the risk of a Greek exit shouldn΄t be underestimated.
And U.S. Treasury Secretary Jacob Lew on Friday said it was wrong to think that European and global markets are insulated from a wider Greek crisis. “I do not think that anyone can predict how markets will respond to dramatic changes in circumstances,” he said.
Aside from the Greek situation, Mr. Draghi said the eurozone economy is on more solid footing than it has been in many years, as the region feels the twin effects of lower oil prices and the ECB΄s stimulus that includes record-low interest rates and a recently launched bond-purchase program. “The basis for this recovery is broad and stronger than in the past,” Mr. Draghi said.
The ECB and IMF have both raised their forecasts for economic growth in the eurozone, which is the world΄s second-largest economy after the U.S.
Still, despite more favorable trends from Europe, the global economy isn΄t yet in a phase of robust expansion, he signaled. “I think it΄s premature to talk about vibrant growth,” Mr. Draghi said.