Greece signals June 5 IMF payment as next crisis cliffhanger

Athens

THE Greek government is priming investors for another cliffhanger on June 5.

While Greek Prime Minister Alexis Tsipras's spokesman Gabriel Sakellaridis insisted on Monday that the government will pay salaries and pensions due at the end of this month, he refused to be drawn in on whether the administration will be able to find the roughly 300 million euros (S$442 million) it's due to pay the International Monetary Fund (IMF) at the end of next week.

"This government has the responsibility to pay its obligations, both within Greece and externally," Mr Sakellaridis told reporters in Athens. "The liquidity problems are well known. We want to honour our obligations, and that's exactly why we're seeking this agreement soon."

Greece looks set to miss the May 31 deadline German Chancellor Angela Merkel and French President Francois Hollande set last week for reaching an agreement on aid, with no more meetings of euro-area finance ministers scheduled before then and its creditors still to sign off on Mr Tsipras's economic plans.

Greek Economy Minister George Stathakis said in an interview with Le Monde newspaper that it may still be several weeks until the two sides can reach an agreement, though a deal remains the most likely outcome.

The yield on Greek two-year bonds fell 78 basis points to 23.1 per cent at 3:48pm local time on Monday. Greek stocks fell with the ASE index 2.4 per cent lower.

Some members of Mr Tsipras's Syriza party advocate defaulting on loans rather than backing down from the anti-austerity policies that swept it to power in January even if that leads the country out of the euro.

Greece doesn't have the money and won't pay what it owes the IMF next month, Interior Minister Nikos Voutsis, who isn't involved in economic policy, said in a Mega TV interview on Sunday. Spiegel Online on April 1 cited Mr Voutsis as saying Greece should delay an April 9 payment to the fund and that payment was made.

Credit rating companies treat the IMF differently from other creditors so the failure to service official loans wouldn't necessarily cause them to downgrade Greece to "default".

Still, missing the June 5 payment to the fund could trigger a chain reaction that includes the European Central Bank (ECB) raising the discount it applies to collateral that the Greek banks post for emergency liquidity assistance.

"We've done remarkably well for an economy that doesn't have access to the money markets to meet our obligations," Finance Minister Yanis Varoufakis said on Sunday. "At some point we will not be able to do it."

"Austerity is the only deal-breaker," Mr Varoufakis wrote in a Project Syndicate blog entry.

"Greece's creditors insist on even greater austerity for this year and beyond . . . Our government cannot - and will not - accept a cure that has proven itself over five long years to be worse that the disease," he wrote.

Mr Sakellaridis denied a report by Greece's Mega TV that Mr Tsipras had asked US Treasury Secretary Jack Lew to help persuade the IMF to agree to group all four June repayment instalments to the end of the month.

"I read these reports, there is no such case. We have not examined it and no such case has been put to the Greek government," he said.

The spokesman also dismissed speculation of possible capital controls - meaning limits on cash withdrawals - being imposed over next weekend if no deal emerges.

"Such scenarios are entirely baseless and malicious . . . There is absolutely no possibility of capital controls," he said at Monday's briefing. The ECB increasing the collateral haircut would "complicate" the talks, he added.

Greece is still trying to bridge differences with its creditors over pensions, sales-tax rates, labour market reforms and the targets for its primary budget surplus, Mr Sakellaridis said.

Euro-area finance ministry officials will hold a teleconference call on Thursday to discuss Greece's progress, according to two people familiar with the matter said, who asked not to be named in line with policy. Earlier in the week, the ECB's Governing Council will hold its weekly review of emergency liquidity support to the country's lenders.

While Mr Tsipras is appealing to Greece's creditors to reciprocate after his government backed down over key demands, German Finance Minister Wolfgang Schaeuble signalled little willingness to grant concessions.

"The problems are rooted in Greece," Mr Schaeuble said in a Deutschlandfunk radio interview aired on Sunday. "And now Greece does have to fulfil its commitments." BLOOMBERG, AFP

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