The U.S. is pushing Greece and its creditors to continue bailout negotiations ahead of a referendum Sunday.
U.S. officials are urging Athens to agree to economic overhauls–and eurozone countries to accept debt relief–as a crucial to a pragmatic compromise, senior U.S. Treasury officials said Monday.
Greece’s government has instituted capital controls to prevent the collapse of the country’s financial system, and Athens has said it will default on its payment due to the International Monetary Fund Tuesday after months of emergency financing failed to secure a deal. Prime Minister Alexis Tsipras over the weekend scheduled a referendum for Sunday to determine whether there is political support for the tough economic overhauls and budget cuts the country’s creditors are requiring to release emergency bailout cash.
A “no” vote by Greeks could force the country out of the eurozone and push the country into what could be the darkest chapter of its six-year debt crisis.
Mr. Tsipras’ surprise referendum call scuttled the bailout talks, but U.S. officials say Secretary Jacob Lew and his lieutenants are pushing the Eurozone to continue negotiations ahead of Sunday’s vote.
The U.S. Treasury officials said that while they are pressing eurozone officials, notably fiscal-hawk Germany, to offer Greece debt relief, Washington isn’t saying about how Europe should restructure the country’s debt. Some former IMF officials say that Greece’s economy can’t return to health without a write-down on the value of the bonds held by the eurozone governments. The IMF, however, says that extension of the debt maturities several decades into the future and interest rate cuts could reduce the burden of Greece’s debt enough to allow the country to return to growth.
Direct U.S. exposure to Greece is limited. But despite much stronger financial firewalls and healthier eurozone economies, a worsening Greek crisis could still weigh on weak European growth, which in turn drag on U.S. economic prospects.
Source: Dow Jones Newswire
