According to a German IWH institute study, the Greek debt crisis has saved the German government some €100 billion ($109 billion) in lower borrowing costs because investors have sought safety in German bonds.
The IWH study says that even if Greece defaults on all its debt, Germany would still benefit.
Greece is hoping to reach a third bailout agreement, worth up to €86 billion, with its creditors this week.
Germany has funded €90 billion so far and wants tough conditions for a new deal.
Greece missed two key payments to the IMF in June and July, before a deal on a bridging loan was thrashed out by EU leaders.
The terms of the third bailout need to be reached by August 20, when Greece’s next debt repayment to the European Central Bank becomes due.
Greek officials said negotiations were in the “final stretch”, prompting shares in Athens to jump more than 2%. But leading figures in Berlin were cautious that a final deal was close.
German Chancellor Angela Merkel’s spokesman Steffen Seibert said “thoroughness comes before speed”.
German officials are keen for Greece to sign up to credible pension reforms and privatization plans, while the Athens government is looking for urgent funding to recapitalize the country’s ailing banks.
Any deal will have to be ratified by German parliament, many of whom object to handing more funding to the left-wing Syriza government of Alexis Tsipras.
However, the study by Halle Institute for Economic Research said Germany had made interest savings of more than 3% of GDP between 2010 and 2015, and much of that was down to the Greek debt crisis.
Greece sought its first EU-IMF bailout in 2010 and Germany provided funding over the past five years either directly or through the IMF or the European Stability Mechanism.
The IWH study says every time this year there was a spike in the Greek debt crisis, which made Greece’s exit from the euro appear more likely, German government bond yields fell. Whenever the news looked better, Germany’s bond yields increased.
Even if the situation were to calm down suddenly, Germany would still be expected to profit from the situation, the IWH argues, because medium- and long-term bonds issued in recent years are still far away from maturing.
Greek PM Alexis Tsipras has made a defiant speech as cash withdrawal limits begin to bite for bank customers.
Alexis Tsipras promised Greeks their pensions and wages would be safe.
Earlier the prime minister offered new concessions to eurozone partners, accepting most conditions that were on the table before talks collapsed.
Germany says talks requested by Greece will not be possible until after a debt referendum called by Alexis Tsipras for July 5.
In his address on July 1, Alexis Tsipras thanked Greeks for their “calm” in the face of bank closures and said their salaries and pensions would “not be lost”.
He angrily denied he had a secret plan to take Greece out of the euro, calling those who accused him of this “liars”.
Greek banks did not open this week after the ECB froze their liquidity lifeline.
Withdrawals from cash machines are capped at just €60 a day and long queues have been forming outside banks.
However, up to 1,000 branches re-opened on July 1 to allow pensioners – many of whom do not use bank cards – a one-off weekly withdrawal of up to €120.
Many pensioners had waited outside banks from before dawn, only to be told to return on Thursday or Friday, the Associated Press reported.
Some pensioners were told their pensions had not yet been deposited, AP said.
Close to 300 pensioners marched on the Bank of Greece in Athens after being given only a small sum from banks in the morning instead of the entire €120.
The letter sent to creditors by PM Alexis Tsipras says he was prepared to accept a deal put forward last weekend, if a few changes were agreed.
European markets surged on the news Greece might be willing to accept a deal.
However, German Chancellor Angela Merkel said no new bailout talks would be possible before Greece holds Sunday’s referendum.
As well as seeking further amendments to the creditors’ proposals, Alexis Tsipras’ latest offer is tied explicitly to agreement on a request for a third bailout lasting two years and amounting to €29.1 billion.
His application for a third bailout was accompanied by a request for debt restructuring that other eurozone countries would, at this stage, be unwilling to consider.
Two key meetings are to take place to discuss aid for Greece, after Athens missed the deadline for a €1.5 billion ($1.7 billion) payment to the IMF on June 30.
Eurozone finance ministers were set to discuss Greece’s new proposal in a conference call.
The second meeting will see officials with the European Central Bank (ECB) deciding on whether to demand more collateral from Greek banks on emergency loans it has given them.
With the previous eurozone bailout expired, Greece no longer has access to billions of euros in funds.
Only three other countries are still in arrears to the IMF – Sudan, Somalia and Zimbabwe. Between them, they owe €1.6 billion, only marginally more than Greece.
Greece’s PM Alexis Tsipras has announced that the Greek banks are to remain closed and capital controls will be imposed.
Speaking after the European Central Bank (ECB) said it was not increasing emergency funding to Greek banks, Alexis Tsipras said Greek deposits were safe.
Greece is due to make a €1.6 billion payment to the International Monetary Fund (IMF) on June 30 – the same day that its current bailout expires.
The country risks default and moving closer to a possible exit from the eurozone.
Greeks have been queuing to withdraw money from cash machines over the weekend, and the Bank of Greece said it was making “huge efforts” to keep the machines stocked.
Greek banks are expected to stay shut until July 7, two days after Greece’s planned referendum on the terms it had been offered by international creditors for receiving fresh bailout money.
The Athens stock exchange will also be closed on June 29.
Eurozone finance ministers blamed Greece for breaking off the talks, and the European Commission took the unusual step on Sunday of publishing proposals by European creditors that it said were on the table at the time.
Greece described creditors’ terms as “not viable”, and asked for an extension of its current deal until after the vote was completed.
“[Rejection] of the Greek government’s request for a short extension of the program was an unprecedented act by European standards, questioning the right of a sovereign people to decide,” Alexis Tsipras on June 28 said in a televised address.
“This decision led the ECB today to limit the liquidity available to Greek banks and forced the Greek central bank to suggest a bank holiday and restrictions on bank withdrawals.”
Alexis Tsipras said he had sent a new request for an extension to the bailout.
“I am awaiting their immediate response to a fundamental request of democracy,” he said.
Following the news from Greece the euro fell by nearly two US cents against the dollar in early Asia Pacific trade, Reuters reported.
The announcement comes after a particularly turbulent few days for Greece.
The current ceiling for the ECB’s emergency funding – Emergency Liquidity Assistance (ELA) – is €89 billion. It is thought that virtually all that money has been disbursed.
The Greek lawmakers have backed plans for a referendum on international creditors’ terms for a new bailout.
The July 5 referendum was called by Prime Minister Alexis Tsipras, who opposes further budget cuts. He urged voters to deliver a “resounding <<No>>” to the package.
Eurozone partners have criticized Greece’s referendum announcement, and rejected its request to extend the bailout program beyond June 30.
Greece could default on a €1.6 billion repayment to the International Monetary Fund (IMF) due on that day.
There are fears the country may leave the euro and that its economy may collapse without new bailout funds.
Alexis Tsipras’ motion on a referendum easily won backing in the 300-member strong parliament, with at least 179 lawmakers voting in favor of it in the early hours of Sunday, June 28.
Speaking just before the vote, Alexis Tsipras described the creditors’ proposal as “an insulting ultimatum” and said an emphatic “No” vote on July 5 would strengthen Greece’s negotiating position.
His government had earlier rejected the creditors’ offer of a five-month extension to Greece’s bailout program in exchange for reforms.
On June 28, eurozone finance ministers rejected the Greek proposal for the bailout extension beyond Tuesday’s deadline. A Eurogroup statement said Greece had broken off negotiations over a new bailout deal “unilaterally”.
Eurogroup head Jeroen Dijsselbloem said it would now be up to the European Central Bank (ECB) to decide whether to continue providing emergency liquidity funding to the Greek banking system.
Meanwhile, queues have formed in Greece outside banks in the past few days amid concerns that the central bank might start restricting withdrawals.
Greece will offer new proposals to creditors ahead of an emergency EU summit planned for June 22, State Minister Alekos Flambouraris has said.
Alekos Flambouraris also told Greek media he believed the European Central Bank (ECB) would not allow the country’s banks to collapse.
Reports say billions of euros have been withdrawn from Greek banks in the past week.
The summit comes amid attempts to prevent Greece defaulting on a €1.6 billion IMF loan repayment.
The European Commission, the IMF and the ECB are unwilling to unlock bailout funds until Greece agrees to reforms.
They want Greece to implement a series of economic changes in areas such as pensions, VAT and on the budget surplus before releasing €7.2 billion of funds, which have been delayed since February.
Details of the new proposals have not yet been released.
Greek PM Alexis Tsipras has said he believes “there will be a solution based on respecting EU rules and democracy which would allow Greece to return to growth in the euro”.
However, German Chancellor Angela Merkel has warned there must be a deal between Greece and its creditors ahead of June 22 summit.
Otherwise, Angela Merkel said, the summit would not be able to make any decision.
Alexis Tsipras was due to hold further talks with his negotiating team in Athens on June 20.
Greece has less than two weeks before the IMF loan repayment is due.
If Greece fails to make the repayment, it risks having to leave the eurozone and possibly also the EU.
On June 19, the European Central Bank (ECB) approved more emergency help for Greece’s banks. The amount of extra funding has not been officially disclosed.
Reuters news agency said withdrawals by Greek savers between Monday and Friday reached about €4.2 billion, which represents about 3% of household and corporate deposits held by Greek banks at the end of April.
Close to €1 billion was withdrawn on Friday alone, the financial website Euro2day said.
“There are no lines [queues] or panic, it has been a quiet and gradual phase of withdrawals,” one banker told Reuters.
A meeting of European finance ministers in Luxembourg ended with no agreement on Greece’s debt.
The head of the Eurogroup, Jeroen Dijsselbloem, has said that Greece needs to seize a “last opportunity” to reach a deal with its creditors.
Jeroen Dijsselbloem called on Greece to submit “credible” proposals in the coming days.
To help tackle the crisis, an emergency summit of leaders from Eurozone nations has been called for June 22.
Jeroen Dijsselbloem highlighted that “very little time remains” as Greece’s current bailout program runs out this month.
“It is still possible to find an agreement and extend the current program before the end of the month, but the ball is clearly in the Greek court to seize that last opportunity,” he said.
The Greek finance minister, Yanis Varoufakis, said his nation had presented a “comprehensive” proposal and that disagreement only existed over spending equivalent to 0.5% of Greek GDP, which he says does not constitute a “dangerous impasse”.
Yanis Varoufakis highlighted that Greece has already made a “gigantic adjustment” over the last five years and rejected any measures that would “jack-up” taxes and reduce benefits further.
He warned that negotiations were “dangerously close to a state of mind that accepts an accident”.
Greece has less than two weeks remaining to strike a deal with its creditors or face defaulting on an existing €1.6 billion loan repayment due to the IMF.
The country has already rolled a €300 million payment into those due on June 30.
If it fails to make the payment, Greece risks has to leave the eurozone and possibly also the EU.
The European Commission, the IMF and the European Central Bank (ECB) are unwilling to unlock bailout funds until Greece agrees to reforms.
They want Greece to implement a series of economic changes in areas such as pensions, VAT and on the budget surplus before releasing €7.2 billion of funds, which have been delayed since February.
Pressure was also raised on Greece today when the boss of the International Money Fund (IMF), Christine Lagarde, warned there was “no period of grace” for Greece over its impending debt repayment deadline.
Christine Lagarde said Greece would be in default on its loans from the IMF if it failed to make a €1.6 billion ($1.8 billion) payment on June 30.
The Bank of Greece has warned for the first time that the country could be on a “painful course” to default and exit from both the eurozone and the EU.
The central bank’s warning comes as the government and its international creditors blamed each other for failing to reach a deal over economic reforms.
That failure is holding up the release of €7.2 billion in bailout funds.
About €30 billion was withdrawn from Greek bank deposits between October and April, the central bank added.
The central bank also warned Greece’s economic slowdown would accelerate without a deal.
“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 Bank of Greece said in a report.
“Striking an agreement with our partners is a historical imperative that we cannot afford to ignore.”
Finance Minister Yanis Varoufakis, when asked if there could be an agreement at the meeting of euro zone finance ministers in Luxembourg on June 18, said: “I do not believe so.”
He said preparatory work for the meeting had not gone far enough for a deal.
Greek shares fell sharply again. The Athens General Index closed 3.2% lower which takes its loss for the past four trading sessions to almost 19%.
Austrian Chancellor Werner Faymann was in Athens on June 17 in a last-ditch bid to end the standoff.
“For Europe to be stronger, it must show solidarity and support to any country which needs it,” Werner Faymann said during a meeting with Greek President Prokopis Pavlopoulos.
That came ahead of a meeting of euro zone finance ministers on June 18 although officials have played down expectations of a make-or-break decision being reached.
The Austrian chancellor’s comments followed a harsher critique from European Commission President Jean-Claude Juncker, who on June 16 accused the Greek government of misleading voters, as Greek PM Alexis Tsipras accused the EU and International Monetary Fund (IMF) of trying to “humiliate” his country.
Greece has two weeks remaining to strike a deal with its creditors or face defaulting on an existing €1.6 billion loan repayment due to the IMF.
The country has already rolled a €300 million payment into those due on June 30.
Jean-Claude Juncker said the Greek government had not told the truth about its latest reform proposals.
“I am blaming the Greeks [for telling] things to the Greek public which are not consistent with what I’ve told the Greek prime minister,” he said.
PM Alexis Tsipras has said that the lenders wanted to raise VAT on electricity.
Other Greek ministers have criticized suggestions to increase sales tax on medicines.
Jean-Claude Juncker said: “I’m not in favor, and the prime minister knows that… of increasing VAT on medicaments and electricity. This would be a major mistake.”
“The debate in Greece and outside Greece would be easier if the Greek government would tell exactly what the Commission… are really proposing,” he added.
YanisVaroufakis claimed that EU proposals did include VAT increases: “Juncker either hadn’t read the document he gave Tsipras – or he read it and forgot about it.”
Elsewhere in the eurozone, Portugal’s short-term borrowing costs rose sharply on June 17, with yields on six-month treasury bills jumping from minus 0.002% to 0.044% at the country’s latest debt auction.
The rise came despite an assurance to investors from Portuguese PM Pedro Passos Coelho that his country would not be “the next to fall” in the event of a Greek default.
Addressing his first cabinet meeting, Greece’s new Prime Minister Alexis Tsipras says his country will not default on its debts.
Alexis Tsipras said he would negotiate with creditors over the €240 billion ($270 billion) bailout.
“We won’t get into a mutually destructive clash but we will not continue a policy of subjection,” said the left-wing Syriza party leader.
Germany’s vice-chancellor, Sigmar Gabriel, said it was unfair of Greece to expect other states to pick up its bills.
“I cannot imagine a haircut [debt reduction],” Sigmar Gabriel said.
As Alex Tsipras made his debut cabinet speech, Greek government bond yields rose to their highest since the 2012 debt restructuring, amid investor concern that the anti-austerity coalition was gearing up for a clash with international creditors.
The Athens Stock Exchange fell by 8% in response to Alexis Tsipras’s remarks, and as it emerged that his government was putting on hold major privatization projects, including the port of Piraeus and the main power company, the Public Power Corporation of Greece.
Greece has endured tough budget cuts in return for its 2010 bailout, negotiated with the “troika” – the European Union, International Monetary Fund (IMF) and European Central Bank (ECB).
The country’s economy has shrunk drastically since the 2008 global financial crisis, and high unemployment has thrown many Greeks into poverty.
Vowing to defend Greek dignity, Alexis Tsipras said a renegotiation of the Greek debts would aim for a “viable, fair, mutually beneficial solution”. He did not give any details.
Alexis Tsipras promised “realistic proposals” for an economic recovery and vowed to fight corruption and tax evasion. His recovery plan, he said, was aimed at preventing deficits in the future.
The new coalition government – with the right-wing but equally anti-austerity Greek Independents – was sworn into office on January 27.
Its chief economics spokesman, Euclid Tsakalotos, has argued that it is unrealistic to expect Greece to repay its huge debt in full.
The current bailout program of loans to Greece ends on February 28. There are still 1.8 billion euros of loans that could be disbursed to Greece if it meets the conditions imposed by the troika.
Economists estimate that Greece needs to raise about 4.3 billion euros in Q1 2015 to help pay its way, with Athens possibly having to ask the IMF and eurozone countries.
Sigmar Gabriel, who is also economy minister and leads the junior partner in Angela Merkel’s coalition government, said: “Our aim must be to keep Greece in the eurozone but solidarity and fairness work both ways.”
“Citizens of other euro states have a right to see that the deals linked to their acts of solidarity are upheld,” he said.
“Every country in Europe has its own history and cannot separate itself from this through new elections.”
Sigmar Gabriel urged the Greek government to talk to its partners before going ahead with decisions such as halting the privatization of the port of Piraeus.
“Things that Greece itself won’t do cannot be shunted on to the taxpayers and employers in neighboring states,” the German Social Democrat leader said.
Greek 10-year bond yields climbed above 10%, reflecting fears that investors may not get their money back.
The yield of a bond is inverse to its price: as the price goes down, the yield grows.
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