The possibility of Greece defaulting on its debt at the end of June has now been formally discussed for the first time by senior European Union officials, Reuters reports.
Representatives of both the EU and Greece late Thursday wrapped up talks in Bratislava, Slovakia, where they discussed several scenarios for what would could happen if Greece misses the June 30 deadline to repay 1.6 billion euros to the International Monetary Fund. Negotiations between Athens and its creditors have stalled.
The least likely scenario is that creditors would strike a deal on reforms with Athens in time to disburse the 7.2 billion euros that remain available to Greece from its bailout package with lenders, a source familiar with the discussions told Reuters.
“It would require progress in a matter of days that has not been possible in weeks. The reaction of the [European Central Bank], the IMF and several member states was extremely skeptical,” the source said.
The second scenario would be that the current bailout would be extended to keep the 7.2 billion euros, and 10.9 billion euros set aside for Greek bank recapitalization, available for Athens once a reform deal is reached later.
The source said that a number of extension deadlines were discussed, varying from a few weeks to the end of the year or even to the end of March 2016. Greece would have to agree to further conditions and the funds could be dispersed in tranches as the conditions were met.
However, EU officials are also now preparing for the possibility of a Greek debt default.
“For the first time there was a discussion of a ‘Plan B’ for Greece,’” a second official told Reuters. Two other officials confirmed the conversation.
If there was a default, Greece would likely have to impose capital controls to prevent an outflow of euros from the country and issue IOUs as an alternative means of payment, Reuters said.