May 21, 2015 / 11:37 AM / 4 years ago

Greek optimism about imminent deal not justified: Schaeuble

BERLIN (Reuters) - German Finance Minister Wolfgang Schaeuble has told Reuters the Greek government’s optimism about clinching a cash-for-reforms deal with its lenders within days is not backed up by the negotiations, and he cannot rule out Greece becoming insolvent.

A man takes part in a anti-austerity pro-government demo in front of the parliament in Athens February 11, 2015. REUTERS/Yannis Behrakis

Greek Finance Minister Yanis Varoufakis said on Monday that an agreement could be reached within a week.

But Schaeuble said reports from the International Monetary Fund, the European Central Bank and the European Commission on their negotiations with Athens suggested talks were progressing “very hesitantly”.

“What I know from discussions with the three institutions does not back up the optimism arising from announcements from Athens,” Schaeuble said in an interview on Wednesday.

“There is not yet any substance to the mere announcement that we are closer to an agreement. This is still within the realms of atmosphere.”

Both Greece’s European Union and IMF lenders have said talks are moving too slowly for a deal in the coming days.

Asked whether he thought Greece was coming ever closer to insolvency, Schaeuble said the situation was in Athens’ hands, adding: “I can’t rule anything out, in any case.”

In the latest warning that Greece is teetering on the brink of default, a senior Greek ruling party lawmaker said on Wednesday that it could not make a payment due to the IMF on June 5 unless foreign lenders disbursed more aid.

But Schaeuble said such a payment would contravene an agreement between the Eurogroup of euro zone finance ministers and Greece on Feb. 20, when Athens was granted a four-month extension of its rescue package in return for promising economic reforms.

Schaeuble said Greece was likely to be discussed at a meeting of Group of Seven finance ministers and central bank chiefs in Dresden next week, although it was not officially on the agenda.

G7 FINANCE MINISTERS

He said the talks might also include, on an informal level, the increase in the yuan’s importance and its possible inclusion in the International Monetary Fund’s currency basket.

The participants will also discuss how to improve sustainable growth through the interplay between economic and monetary policy, as well as addressing the limits of monetary policy and how to prevent new bubbles forming, he said.

Schaeuble reiterated that the German government would use any extra financial leeway that arises to boost public investment - which a panel of experts last month said was too low - but said he did not currently see any scope for further investment beyond what the government has already announced.

Germany has come under pressure from its European Union partners and the United States to boost investment spending. The International Monetary Fund said last week that Berlin’s plans to spend more on public transport, digital infrastructure and energy efficiency did not go far enough.

But Schaeuble said: “At the moment we should, by the way, rather make sure that we don’t produce signs of overheating with investment, because that just leads to price increases and no sustainable growth.”

He added that it was necessary to keep an eye on capacity utilisation in the construction sector, which he said looked “relatively good” at the moment.

Europe’s largest economy has a current account surplus of more than 7 percent of economic output and some economists say this has spawned damaging imbalances within the euro area.

Turning to Germany’s banking industry, Schaeuble said he was not concerned about the health of the sector after ratings agency Fitch this week downgraded some major German banks including Commerzbank (CBKG.DE) and Deutsche Bank (DBKGn.DE).

“We have no reason to worry about the performance capability of the German sector,” he said, adding that it remained competitive overall.

Editing by Paul Carrel and Kevin Liffey

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