Jack Lew: The Greek government must make tough fiscal decisions to reach an agreement with international creditors

The Greek government must make tough fiscal decisions to reach an agreement with international creditors, or it risks catastrophic consequences for its economy and people, U.S. Treasury Secretary Jack Lew said in an interview released on Saturday.

“I think we’re at a moment now where the burden is on Greece to come back with a response that’s the basis for reaching an agreement as quickly as possible,” he said on CNN’s “Fareed Zakaria GPS,” according to a transcript.

“What we know is the best solution is for Greece to make some tough decisions and for this to be worked out,” he said.

Greece is close to default on a 1.6-biilion-euro repayment to the International Monetary Fund on June 30, with the government announcing that it has no money to make the payment unless it receives further financial aid until then. Bankruptcy and Grexit scenarios are prevalent in international mass media.

Greek depositors are pulling money out of banks at an alarming rate, making the capital controls threat all the more tangible.

Creditors, on the other hand, insist that the Alexis Tsipras government must proceed with certain required reforms as dictated by the current bailout program. Negotiations have stalled, with Athens insisting that its debt problem requires a political solution. A blame game is taking place in the last few days with the two sides accusing each other for lack of cooperation.

The United States is keeping an eye on developments and urges Greece to return to the negotiating table with solid fiscal proposals. Last Tuesday The Treasury Secretary called Alexis Tsipras to emphasize “the urgency of Greece making a serious move to reach a pragmatic compromise with its creditors.”

“The risk of contagion obviously is different than it was in the past because Greek sovereign debt is no longer sitting on the balance sheets of financial institutions. It’s mostly sitting in sovereign places,” Lew told Zakaria.

However, Lew said, no one can predict how the international markets will react to Greece’s default or exit from the Eurozone. “I don’t think anyone should want to find out,” he said.

Finally, the U.S. Treasury Secretary said, “It’s clear that within Greece, the consequence of a failure here would mean a terrible, terrible decline in their economic performance. It will hurt the Greek people. They will bear the first brunt of a failure here.”