Published On: Tue, May 12th, 2015

Greece draws on IMF emergency fund to repay debt

Symbolbild Griechenland Schuldenkrise Zentralbank in Athen

Symbolbild Griechenland Schuldenkrise Zentralbank in Athen

Athens has been forced to tap into an emergency account with the International Monetary Fund (IMF) to make a multi-million-euro debt payment, highlighting its desperate need for cash rather than soothing default fears.

Quoting government officials in Athens, news agency Reuters reported Monday that the leftist government of Prime Minister Alexis Tsipras had to use emergency reserves in its holding account with the IMF to repay a debt of 750 million euro ($839 million).

The news was confirmed by a source within the Greek central bank, cited by news agency AFP. “That was an initiative by the Bank of Greece’s governor to break the deadlock,” the source reportedly said.

Amid mounting speculation of Athens defaulting on parts of its 325 billion euros in total debts, there had been doubts in recent days whether the Greek government would pay the IMF or opt to save cash to pay salaries and pensions later this month.

IMF member countries have two accounts at the fund – one where their annual quotas are deposited and a holding account, which may be used for emergencies.

One official told Reuters that Athens used about 650 million euros from the holding account to make the payment. “We made use of money in our holding account in the fund,” the official said, declining to be named. “The government also used about 100 million of its cash reserves.”

A second Greek official told Reuters on Tuesday that the reserves the government tapped must be replenished in the IMF account within “several weeks.”

Greece faces cash crunch

No cash-for-reforms deal yet

Made a day early, the payment calmed immediate fears of a Greek default. But Greek Finance Minister Yannis Varoufakis said on Monday the liquidity situation was “terribly urgent” and a deal to release further funds from Greece’s bailout lenders was needed in the next couple of weeks.

Greece has been in talks with its international creditors for months, trying to secure more favorable conditions for the repayment of its debt. The nation’s dire financial situation has made a successful conclusion to the talks more urgent, and Athens has been pushing for European officials to acknowledge its progress in reforming its economy to unlock 7.2 billion euros in further financial aid.

Following talks in Brussels on Monday, the eurozone finance ministers’ forum, called the Eurogroup, said, however, a comprehensive deal was not imminent.

“More time is needed to bridge the remaining gaps,” Eurogroup President Jeroen Dijsselbloem told reporters in Brussels.

Dijsselbloem conceded that talks with the new team were “more efficient, more positive, more constructive.”

“We are making faster progress,” Dijsselbloem said.

But those controlling the purse-strings in other eurozone countries as well as the heads of the European Central Bank (ECB) and the International Monetary Fund have been guarded with their praise for Greece, which they say is still in danger of defaulting as important deadlines loom.

Looming deadlines

Over the next three months, Athens needs to repay more than 11.5 billion euros in bonds and refinance another 10.6 billion in treasury bills. Before their statement following Monday’s Eurogroup meeting, eurozone officials dashed hopes of the ECB raising the limit on short-term treasury bills that Greek banks can buy, a move that would lower the chances of a Greek default.

Dijsselbloem also stressed on Monday that a four-month deadline set on February 20 was still the foundation for negotiations and any disbursement of funds for Greece was predicated on this deadline being met.

uhe/ng (AFP, Reuters)

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