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Greek Central Bank Warns of ‘Uncontrollable Crisis’ if Bailout Talks Fail

The Wall Street Journal The Wall Street Journal
By Stelios Bouras

ATHENS—Greece’s central bank warned Wednesday that failure to clinch a deal with international creditors on its future funding needs could lead the country into an “uncontrollable crisis,” describing the issue as being of historical significance for the nation.

In its annual monetary report, the Bank of Greece, the country’s central bank, said that based on evidence so far, it seems that a compromise has been reached on the main conditions attached to the lending agreement and that little ground remains to be covered.

“Failure to reach an agreement would… mark the beginning of a painful course that would lead initially to a Greek default and ultimately to the country’s exit from the euro area and—most likely—from the European Union,” the report said.

“A manageable debt crisis, as the one that we are currently addressing with the help of our partners, would snowball into an uncontrollable crisis, with great risks for the banking system and financial stability.”

All this would imply deep recession, a dramatic decline in income levels, an exponential rise in unemployment and a collapse of all that the Greek economy has achieved over the years of its EU, and especially its euro area, membership, the report added.

On Tuesday, Greek Prime Minister Alexis Tsipras lambasted creditors for their handling of his country’s debt crisis, but suggested that a coming summit of European leaders could be the decisive moment in the drawn-out negotiations.

Athens and the lenders remain at odds over demands for austerity in exchange for funds desperately needed to avoid a default. The dispute is likely to come to a head at a European summit on June 25, if not earlier, at which either Greek Prime Minister Alexis Tsipras or German Chancellor Angela Merkel may have to back down.

Greece said that it cannot accept deeper austerity demands from its international creditors—other eurozone countries and the International Monetary Fund—accusing them of trying to humiliate the country and the IMF of having “criminal responsibility” for the country’s current economic woes.