Greece plays down fears of debt default

Greece and its Europeans creditors yesterday sought to play down fears that Athens would default on a payment to the IMF next week.

Running short of cash to pay salaries, pensions and debt obligations, senior members of Alexis Tsipras’s government have said openly that Greece does not have the money to pay €300m to the IMF on June 5. The threats have spooked financial markets, which fear a default could force Greece out of the single currency, pushing the European and global economies into uncharted territory.

Still, the government on Monday reiterated that it would try to make the payment and finance minister Yanis Varoufakis expressed confidence a deal with lenders would be struck in time to avoid default.

Asked if Athens could make the payment, he said: “Of course, because there will be a deal by June 5.”

The comments drew a positive reaction in Germany, Greece’s biggest creditor and one of its toughest critics in long-running aid negotiations with its EU and IMF lenders.

And European Commission president Jean-Claude Juncker also expressed optimism that Athens would pay up in time.

“My impression, after talking to a series of colleagues, is that the feeling is growing that a default should be avoided,” he told MNI news agency. Asked how a default would affect the negotiations, he said: “The Greek colleagues have to know that we think they have to pay in June.”

Reflecting the improved mood, a survey of mostly German-based investors showed the probability Greece leaving the eurozone in the next year has fallen to 41% in May from 49% in June. The June 5 payment is the first of four loan instalments totalling €1.6bn due to the IMF next month.

Greece could win more time to negotiate a funding deal without defaulting if it lumps together all IMF repayments due in June and pays them at the end of the month, eurozone officials said, but Athens has ruled out such an option.

Shut out of bond markets and with bailout aid frozen, the country says it is running out of cash and would prioritise paying civil servants and pensioners over the IMF if it is forced to choose.

Talks between Greece and its creditors on more funding have been dragging on since late January, when Tsipras took power on promises of ending austerity and reversing reforms agreed with the creditors by the previous government.

A new round of talks with theIMF, ECB, and European Commission was scheduled to start yesterday but was postponed until today for “technical reasons”, a Greek official said.

The talks have foundered on Athens’ insistence to roll back labour and pension reforms and lower the primary budget surplus target as well as creditors’ demands for value-added-tax hikes.

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