Grexit? Greece again on the brink as debt crisis threatens break with EU

In the week of Groundhog Day it seemed entirely appropriate: Greek farmers, many on tractors, have once again been blockading roads and border posts amid mounting signs that the country long at the centre of Europe’s debt woes is – once again – teetering towards crisis.

Protesting farmers have been a regular feature of the social unrest that has sporadically gripped Greece. It is now more than seven years since the Greek financial crisis erupted and the debt drama has often had a deja vu quality about it.

Eclipsed last year by the UK’s vote to exit the EU, and Donald Trump’s equally unlikely US electoral victory, the nation’s epic struggle to keep bankruptcy at bay has been out of the spotlight.

Bailout negotiations between Athens and its creditors have stalled. The possibility of Grexit, or euro exit, has re-emerged and bond yields have soared. The yield on two-year Greek government bonds has risen from 6% to 10% in less than two weeks as spooked investors have dumped their holdings. And the shrill rhetoric last seen at the height of the crisis in 2015 has returned.

Analysts sensing dangerous deadlock are sounding the alarm – an alarm that the embattled prime minister, Alexis Tsipras, was expected to raise in talks with the German chancellor and other European leaders in Malta on Friday.

“I am very worried we are heading towards a rupture with the EU,” said Pantelis Kapsis, a prominent political commentator. “There are lots of signs that at the back of their minds people in Syriza [the ruling leftist party] are entertaining various ideas of going it alone. What is sure is that we are entering a very difficult period which quite possibly could lead us to a point of no return.”

As always, time is of the essence. Shored up by a third EU-led bailout, Athens was told this week that further rescue funds would not be forthcoming until it concluded a compliance review of terms attached to the €86bn (£74bn) aid package. In July Greece faces debt repayments of €7.4bn, raising the spectre of default because state coffers by then will have run dry.

The impasse has turned into a standoff as creditors demand additional austerity once the current bailout expires. Without further reduction of pensions – already cut 12 times since the crisis began – and the tax-free threshold of personal incomes, the International Monetary Fund (IMF) argues, the debt-stricken country will never be able to achieve its agreed fiscal goal of a primary surplus of 3.5% of GDP from 2018.

In a fiery parliamentary debate late on Wednesday, Tsipras dug in, insisting his two-party coalition – in power with a wafer-thin majority of two – would not cave in to demands that his government has repeatedly called absurd. “The IMF’s demands go beyond any democratic and constitutional logic and value,” he railed.