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 The government representatives, preparing next week's Eurogroup
meeting of euro zone finance ministers, concluded at talks in
Bratislava late on Thursday that there were three possible scenarios
for what would happen with Greece at the end of June. The least
likely, they think, is a successful cash-for-reform deal next week
in time to meet end-June legal deadlines.
The second possibility was a further extension of the current
bailout program, which expires this month at the same time as Greece
must repay 1.6 billion euros to the IMF. The third -- discussed
formally for the first time at such a senior level in the EU -- was
to accept Greece could default.
The meeting reached no decision or concrete conclusion.
Most officials argued that it was unlikely that creditors would
strike a deal on reforms with Athens in time to disburse the 7.2
billion euros that remain available to Greece under a rescue program
extended in February for four months.
"It would require progress in a matter of days that has not been
possible in weeks. The reaction of the ECB, the IMF and several
member states was extremely skeptical," one official familiar with
the discussions said on Friday.
The Greek representative at the meeting said Athens would do
everything to reach a deal in time, other officials said. That would
in effect mean an agreement in time to be endorsed by the Eurogroup
when it meets in Luxembourg late on June 18.
Officials said, however, that even then, disbursement of loans to
Athens by June 30 would be very difficult because of the time needed
to finish all the legal procedures necessary.
Therefore, their second scenario was that the current bailout would
be extended to keep the 7.2 billion euros, and 10.9 billion euros
set aside for Greek bank recapitalization, available for Athens once
a reform deal is reached later.
The money will otherwise disappear and a new bailout agreement would
be needed to secure further financing.
Various extension deadlines were discussed, varying from a few weeks
to the end of the year or even to the end of March 2016, to align
the euro zone's program with the end of the IMF bailout package for
Greece.
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Such an extension would entail imposing further conditions on Greece
and could involve the disbursement of funds in tranches as those
conditions were met.
Representatives of some euro zone countries, however, believe that
governments should prepare for a third scenario -- that of a Greek
default.
"For the first time there was a discussion of a 'Plan B' for
Greece," a second official said. Two other officials confirmed that
such a debate took place.
So far euro zone officials have refrained from discussing such a
possibility, even in closed-door meetings such as the one on
Thursday, even though some governments, including Germany, have been
preparing for it on their own.
The discussion was very theoretical because the scenario of a euro
zone country defaulting within the currency union would be without
precedent. The meeting came to no conclusion on it.
But officials said such a scenario would almost certainly involve
Greece imposing capital controls to prevent an outflow of euros from
the country and could also entail the issuance of IOUs by Athens as
an alternative means of payment.
(Reporting By Jan Strupczewski)
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