Warnings Raised of a Greek Exit From the Euro

Just a few weeks ago, fears that Greece might exit the euro union subsided when Europe extended its financial bailout. But as a new war of words escalates between Athens and its creditors, talk of a “Grexit” is heating up.

In the last several days, European and American banks, think tanks and ratings agencies have issued a fresh round of warnings and studies calculating the damage to the currency union if Greece were to default on its debts or stop using the euro.

Jeroen Dijsselbloem, the head of the Eurogroup body of European finance ministers, this week also raised the possibility of restricting the flow of money in and out of Greece to make sure the country has enough money to pay its debts.

Driving those concerns is an increasingly venomous standoff between Athens and nearly every other country in the 19-member currency union — especially Germany.

One of the main sticking points is Prime Minister Alexis Tsipras’s pushing ahead with an anti-austerity agenda that creditors say conflicts with pledges he made on Feb. 20 in winning an agreement to let Greece extend its 240 billion euro, or $254 billion, bailout program for four months.

That deal was crucial to giving Greece the ability to unlock loan money it badly needs. But so far, no funds have been forthcoming.

On Wednesday, Greece’s Parliament approved a number of anti-poverty measures despite warnings from creditors that the legislation ran contrary to the overall package of changes Greece had agreed last month to adopt.

And it probably did not help Greece’s debt diplomacy that members of Mr. Tsipras’s Syriza party were among the thousands of European demonstrators in Frankfurt on Wednesday protesting, amid tear gas, European Central Bank policies.

Athens has become so politically isolated, even as its coffers run dry, that Mr. Tsipras will be trying to salvage relationships on Thursday and Friday in Brussels at a European Union summit meeting.

He has persuaded Chancellor Angela Merkel of Germany; President François Hollande of France; the European Central Bank president, Mario Draghi; and others to discuss the Greek crisis directly with him. Whether he will clinch a deal to unlock funds and prevent a wider crisis remains to be seen.

Europe has “an overwhelming will to keep Greece in the eurozone,” Pierre Moscovici, the European Commission’s financial affairs chief, told a German newspaper this week. But, he added, “we won’t keep Greece in the eurozone at any price.”

European leaders have fast run out of patience with Greece, especially after Mr. Tsipras last week renewed demands that Germany pay Greece billions in reparations from World War II. And Greece’s outspoken finance minister, Yanis Varoufakis, has reportedly alienated some of his eurozone counterparts by changing his position several times during negotiations.

Members of his Syriza party are also agitated over a recent opulent photo shoot of Mr. Varoufakis in the magazine Paris Match.

On Tuesday, Greece further angered its creditors by refusing to update them on progress it had made since the February deal to put in place economic changes required to free up around €7 billion in funds from Greece’s bailout program. Instead, Mr. Tsipras insisted on waiting to speak directly to Ms. Merkel and others about it in Brussels.

Without the bailout money, the Greek government has little cash left to meet payments owed to creditors for the rest of this month.

The government teeters precipitously close to a default. On Friday, Greece must reimburse €350 million in loans to the International Monetary Fund and roll over €1.6 billion in short-term debt.

Tax receipts have fallen by more than €1 billion since the Syriza party came to power in January. In the face of the cash squeeze, the state has said it might have to borrow money from national pension and farmers’ funds to avoid default, and withhold back payments owed to hospitals and other state entities.

Several of Greece’s largest companies are also privately complaining that the state has not paid them millions of euros owed for construction and other state contracts since December.

A number of large and medium Greek companies have started withdrawing cash overnight from their Greek bank accounts to banks in London, Luxembourg and elsewhere, and returning the money in the morning to finance their business operations, according to Athens-based analysts, bankers and Greek company officials aware of the transfers. All declined to speak for attribution.