Jacob Lew Warns Time Is Running Out to Reach Greek Debt Deal

By JACK EWINGMAY 29, 2015

The New York Times

DRESDEN, Germany — The United States Treasury secretary on Friday once again warned eurozone countries that they should not delay reaching a deal on further aid for Greece, highlighting a growing sense that negotiations are moving too slowly to avoid the country’s disorderly exit from the eurozone, with repercussions for the global economy.

Jacob J. Lew, the Treasury secretary, has used meetings of Group of 7 finance officials and central bankers here this week to push for faster action for Greece. He repeated that message on Friday as the meetings concluded, warning of the risks if Greece and its eurozone partners do not reach an agreement soon.

“What we know for sure is that you keep raising the risk of an accident if you put off the action until whenever the next deadline is,” Mr. Lew said at a news conference.

Greece was not officially on the agenda during the Dresden meetings, which dealt with ways to lift economic growth, improve regulation of banks and prevent tax evasion by large international corporations. But Mr. Lew said there were “quite a number” of informal discussions about Greece, and its need to agree on terms to receive further aid from other eurozone countries.

Wolfgang Schäuble, the German finance minister and Mr. Lew’s counterpart, played down the significance of Greece at the G-7 meeting.

“Despite the expectations of the media, we talked about our agenda, and Greece was not on the agenda,” Mr. Schäuble said at a separate news conference. “We are aware of our responsibility and we will do everything to fulfill it.”

Absent a last-minute deal with its creditors, Greece is expected to run out of money by the end of next month. The government must make more than 1.5 billion euros, or about $1.6 billion, in payments to the International Monetary Fund in June, with the first, for about €300 million, due next June 5.

Officials in Dresden implied that Greece would be able to make the payment on June 5, or delay it in a way that would not constitute a default. But the existing aid package for Greece will expire at the end of June, a deadline that would be harder to finesse.

“This date emerges as a new, crucial watershed not only because the current extension deal expires on that date,” Wolfango Piccoli, managing director of Teneo Intelligence, a consultancy, wrote in a note to clients. “The political appetite for once more extending the current extension is extremely limited in skeptical creditor countries, especially Finland and Germany.”

Christine Lagarde, the managing director of the I.M.F., left the G-7 meeting on Friday without commenting publicly on Greece.

She had raised a stir when she told The Frankfurter Allgemeine Zeitung, in an interview published on Thursday, that there was a “potential” for Greece to leave the eurozone. But it seemed more of an acknowledgment of a possibly grim outcome than a prediction or threat.

According to a transcript of the interview that the I.M.F. released in an effort to quell controversy, Ms. Lagarde also said: “It’s a complicated issue. And it’s one that I hope the Europeans will not have to face because hopefully they will find a path to agree with the future of Greece within the eurozone.”

Any new agreement with Greece will require considerable technical work to put into effect, meaning that eurozone leaders must agree on the basic principle well before the end of next month.

“The program expires at the end of June, that’s the situation,” Mr. Schäuble said.

Greece does have the option of applying for a payback extension, allowing it to bundle together its I.M.F. repayments due in June and make them all payable by the end of that month. It is a seldom-used measure, though. The last I.M.F. debtor to employ it was Zambia several decades ago. The potentially negative market consequences for Greece might discourage the government from going down that path.

Greece and its international creditors have been locked in negotiations aimed at releasing billions of euros of loans since February, when the European portion of the country’s €240 billion bailout was extended by four months. But that agreement made the release of any pending payments to Athens contingent on its adoption of measures to increase tax revenue, contain government spending and carry out labor market and other changes.

Greece, led by a leftist government that came to power opposing the austerity measures required by the country’s international bailout program, is engaged in a domestic political struggle. Prime Minister Alexis Tsipras is trying to contain rebellion in the ranks of the government and in his party, Syriza, about the extent of concessions Greece should make.

Stock and bond markets in Europe have gyrated for weeks as investors speculated on the likelihood of a deal or a possible “Grexit,” or Greek exit, from the 19-nation eurozone.

Mr. Lew on Friday urged the Europeans to avoid finding new ways to delay the day of reckoning.

“It would be in the best interests of all the parties to reach an understanding at a general level and leave some time to work out the details,” Mr. Lew said. He emphasized that he had also told the Greeks that they needed “to make some very tough decisions.”

He said that waiting until a day or two before when the next deadline was “just a way of courting an accident.” Mr. Lew continued: “At some point there won’t be the ability for Greece to pay its bills, and that will be the moment when, if it comes, there’s an accident. If you want to avoid that, the sooner there is a serious conversation the better.”