Greece and creditors play down fears of imminent default

Tue May 26, 2015 1:05pm EDT
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By Lefteris Papadimas and Jan Strupczewski

ATHENS/BRUSSELS (Reuters) - Greece and its European creditors on Tuesday sought to play down fears that Athens would default on a payment to the International Monetary Fund next week.

Running short of cash to pay public sector salaries, pensions and debt obligations, senior members of Prime Minister Alexis Tsipras's government have said openly that Greece does not have the money to pay 300 million euros to the IMF on June 5.

The threats have spooked financial markets, which fear a default could forces 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.

"I find it encouraging, if it is true, that the Greeks signaled yesterday their desire to repay the 300 million euros to the IMF on June 5," a German official said.

"I think there is reason to believe that we will not be talking about a default situation around June 5, neither before or immediately thereafter."

European Commission President Jean-Claude Juncker - who has been in close contact with Tsipras through the slow-moving talks - also expressed optimism that Athens would pay up in time.   Continued...

A Greek flag flies behind a statue to European unity outside the EU Parliament in Brussels, Belgium, May 20, 2015.    REUTERS/Francois Lenoir