Greece liquidity reserves unclear ahead of IMF payment

Greece faces a tense 24-hour standoff with two of its major international creditors this week as Eurozone Finance Ministers prepare to meet in Brussels and speculation mounts as to whether the cash-strapped country will be able to meet a €750 million payment to the International Monetary Fund, sources have told MNI.

As investors focus on the negotiations between Greece and its creditors and the wording of any statement from the latest round of face-to-face talks in the Belgian capital, the real “thriller”, according to one source, revolves around Greece’s cash reserves. Prime Minister Alexis Tsipras has, since Thursday, been coordinating communications between Athens and its creditors in order to find a solution to the rapidly deteriorating situation. And while it is possible that the IMF cash will be found “at the last minute” for repayment Tuesday, some are bracing for the worst.

“No one wants a default by accident,” a well-placed EU source told MNI. “But the IMF has refused to grant Greece an extension and delay the payment.”

Greece has used pending debt payments as leverage in its negotiations with creditors in the past, the sources explained, but on this occasion it appears as though EU officials understand the severity of the country’s cash position.

“The situation has been blurry as to whether Athens has the funds … to either pay the IMF on May 12 or (government) salaries and pension obligations at the end of the month,” the Senior Eurosystem source explained. But on Wednesday, the source went on to say, after further explanations given by Tsipras as well as indications by the central bank of Greece that the special account held for paying state obligations did not have the necessary funds yet, the EU became increasingly worried.

The potential cash crisis comes amid a increasing series of leaks from both the Greek government and EU officials that indicate progress is being made and that negotiations, now partly in the hands of Deputy Foreign Minister Euclid Tsakalotos, have taken on a more positive tone in the absence of combative Finance Minister Yiannis Varoufakis, who will still represent Greece at Monday’s Eurogroup.

However, while the EU source insisted that “paying the IMF on Tuesday has nothing to do with the progress of the negotiations” a Greek government official said Sunday that “we would like to see a Eurogroup statement so we can go ahead with the IMF payment.”

“The money could be there, it could be not. We will see on Tuesday,” said the official after the governmental meeting. He did not elaborate whether Greece has managed to gather the amount and is making it a political decision to repay the IMF based on the outcome of the Eurogroup meeting, or whether the amount has still not been raised.

He insisted though that the Eurogroup could pave the way for the ECB to loosen its policy on Greece Wednesday.

EU officials played down the IMF deadline during a regular briefing with journalists Friday in Brussels, insisting that Athens is expected to “easily” cover its upcoming obligations.

However, MNI sources have said the EU has been quietly trying to resolve the liquidity issue and has been leaking positive notes in order to avoid increasing market speculation and de-stabilizing the country’s fragile banking sector, which, according to a report in the country’s ‘I Efimerida ton Sintakton” newspaper citing a Bank of Greece email, has lost E35 billion in deposits since Syriza came to power in late January.

“There has been constant communication between officials to avoid an accident. Several scenarios have been put on the table,” one EU source said.

“Experience elsewhere in the world has shown that a country can suddenly become unable to pay its bills,” Germany’s Finance Minister warned in an interview published this weekend in the Frankfurter Allgemeine Sonntagszeitung newspaper, adding the Germany would do what it takes to keep Greece in the Eurozone “under responsible conditions.”

Multiple sources told MNI last week that European Commission President Jean-Claude Juncker will push for a deal by the end of the month in order to avoid Athens losing pending loan tranches, although the same sources indicated a deal is still quite far off and obstacles on key issues remain.

On the other hand, the sources have said, the so called hardliners within the EU and the IMF are preparing a complete package for Greece and will present it to Athens at the end of May if the negotiations are not concluded successfully by then.

Tsipras, meanwhile, has been putting a brave face at home as he seeks to quell any political concern that his Syriza party is losing its grip on the negotiations, assuring lawmakers in Parliament Friday that Greece will meet it financial commitments to both its creditors and its citizens.

“I am sure that they all understand that democracy must be protected within the EU,” Tsipras said. “Europe cannot sustain less democracy. If a crime is committed at the country which gave birth to democracy, then no one will silence this crime.”

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