Greece facing default by June 5 unless it gets aid

Greece cannot make an upcoming payment to the IMF on June 5 unless foreign lenders disburse more aid, a senior ruling party politician said yesterday, the latest warning from Athens that it is on the verge of default.

Prime minister Alexis Tsipras’s leftist government says it hopes to reach a cash-for-reforms deal in days, although EU and IMF lenders are more pessimistic and say talks are moving too slowly for that.

Greek officials now point to a race against the clock to clinch a deal before payments totalling about €1.5bn to the IMF come due next month, starting with a €300m payment on June 5.

“Now is the moment that negotiations are coming to a head. Now is the moment of truth, on June 5,” Nikos Filis, spokesman for the ruling Syriza party’s lawmakers, told Anti television.

“If there is no deal by then that will address the current funding problem, they won’t get any money,” he said. Talks between Greece and its lenders have foundered on Athens’s demand to roll back labour and pension reform as well as lower fiscal targets set under its bailout programme.

Among concessions that Athens is mulling is a special tax on banking transactions to help raise revenue to meet fiscal targets, though discussion of the levy is at an early stage, two sources close to the talks said.

If the talks collapse, Tsipras’s government has made clear it will pay pensioners and public workers before servicing debt.

Greek officials have warned several times in recent weeks that Athens could run out of cash, only to then scrape through obligations by resorting to draconian measures such as ordering state entities to hand over cash or in the case of an IMF payment last week, by emptying out an IMF reserves account.

Four days before the payment was made, prime minister Alexis Tsipras wrote to EU and IMF lenders warning Athens could not make the €750m payment — prompting accusations of a bluff that has deepened mistrust.

Still, analysts agree the country’s cash squeeze is increasingly acute and fresh aid will be needed sooner or later to avoid bankruptcy. Ratings agency Moody’s said there was a high likelihood that capital controls and a deposit freeze could be imposed as savers pull deposits from banks over fears of a national bankruptcy and a Greek eurozone exit.

The ECB’s governing council was set to meet last night and decide whether to dole out more emergency liquidity assistance to Greek banks, which have been kept on a drip-feed of liquidity injections amid the crisis. Despite the spectre of impending bankruptcy, Tsipras has sought to maintain a brave face in public and will lobby European leaders at the EU summit in Riga this week for a political agreement to break the impasse.

Briefing top parliamentary officials in his party on Tuesday, Tsipras said the government was aiming for a deal by June 3 that would release over €7bn in pending aid.

Reuters