Greece, EU partners pressed to resolve debt crisis at G-7 finance meeting

[DRESDEN] The United States and Japan pressed Greece and its European partners to resolve Athens' debt crisis and avoid rattling the eurozone and the global economy, as the issue dominated talks of the Group of Seven finance ministers on Friday.

Even though Greece was not on the official agenda of the three-day meeting in Dresden, it was a key topic as time runs out for Athens to reach a deal with its international creditors to unlock 7.2. billion euros (S$10.7 billion) in bailout cash.

"All parties need to move," US Treasury Secretary Jack Lew told reporters after the meeting wrapped up.

Mr Lew urged Greece to bring forward a "credible plan" and "take serious action." But there also "needs to be some flexibility on the part of the institutions," namely the European Central Bank, the International Monetary Fund and the European Commission, Mr Lew said.

The three lenders are demanding that the Greek government push through economic reforms in return for the last tranche of bailout funds.

"Greece needs to make very tough decisions," the US finance chief continued, but "one won't happen without the other." "Everyone agrees that resolving this without crisis would be in the interest of everyone and the global economy," he said.

NO 'GREXIT' SCENARIO

Representatives of the key actors in the Greek negotiations - IMF chief Christine Lagarde, ECB president Mario Draghi and the EU's commissioner for economic and monetary affairs Pierre Moscovic - all attended the Dresden talks, held to prepare for a wider summit of G-7 leaders starting June 7.

Ms Lagarde had caused a flurry the day before by saying in a newspaper interview that a so-called "Grexit" - or Greek exit from the eurozone - was "a potential." But French Finance Minister Michel Sapin insisted: "There is no Grexit scenario." There had been "progress" in the negotiations, but "results are still insufficient so far," Mr Sapin said.

The meeting's host, German Finance Minister Wolfgang Schaeuble, also sought to play down assertions by Athens that Greece is on the verge of reaching a deal with its creditors.

"The positive reports out of Athens don't fully reflect the state of talks," Mr Schaeuble said.

MIXED SIGNALS

The Greek government has sent mixed signals about how close the two sides are to a deal. On the one hand it has suggested that an agreement could be reached by Sunday.

But Finance Minister Yanis Varoufakis told VimaFM radio on Friday that while a deal was close, under a February agreement "the country's aid programme was prolonged until June 30, thus that is the date by which we need to arrive at a deal."

If Mr Varoufakis sees the end of June as the ultimate deadline for a deal, this would offer Athens and its creditors a longer timeframe to conclude their talks than next week, when Greek officials have said they may not have enough money to make a repayment to the IMF.

The governor of the Bank of Japan Haruhiko Kuroda warned of the consequences of a possible "Grexit".

"If for the first time a country leaves the eurozone, then it won't be the same stable monetary union as before," Mr Kuroda told the German business daily Handelsblatt.

In fact, the euro area would then simply resemble a system of fixed exchange rates and such systems had never proven particularly successful in the past, the central bank chief said.

YUAN AMBITIONS

Among the official topics on the G-7 agenda were the state of the global economy, financial regulation, fighting tax evasion and ways of starving jihadist groups like the Islamic State of funding.

The Chinese currency, the yuan or renminbi, also featured in discussions, as Beijing continues to push for it to play a greater role in the world financial system.

It wants the yuan to be included in the basket that makes up the IMF's own "special drawing rights" reserve currency.

Meeting host Schaueble said there was fundamental agreement that this should be the case, but he added that "there are technical issues and not just technical ones" to sort out first.

"It would not be good to rush it," he said.

Schaeuble also said the G-7 countries were prepared to make further financial aid available to Nepal in the wake of the recent devastating earthquakes there.

And the head of the German central bank or Bundesbank, Jens Weidmann, said the G-7 was pushing for a "code of conduct" for banking professionals following a wave of scandals such as the rigging of interest rates and foreign currency markets.

AFP