Greece raids emergency account to repay debt

GMT 19:48 2015 Tuesday ,12 May

Arab Today, arab today Greece raids emergency account to repay debt

Greece is under pressure to reach a rescue deal
Athens - AFP

Greece admitted Tuesday it was scraping the bottom of the barrel for cash as another huge debt repayment loomed, adding pressure to reach a rescue deal with its EU-IMF creditors to avoid default and crashing out of the eurozone.

Athens only managed to repay 750 million euros ($845 million) due Tuesday to the International Monetary Fund after tapping into an emergency account, a central bank source told AFP as alarm grew over Greece's dire finances.

But billions more in loan repayments are due over the next three months, and Greece's Finance Minister Yanis Varoufakis warned that his country risked running out of cash within two weeks if no deal was reached by then with its international creditors to unlock the last tranche of aid funds.

The crisis sent European stocks sinking Tuesday, mirroring sentiments across Asia and on Wall Street.

"The liquidity issue is a terribly urgent issue. It's common knowledge, let's not beat around the bush," Varoufakis said on Monday after talks with his Eurogroup counterparts in Brussels.

"From the perspective (of timing), we are talking about the next couple of weeks."

Athens has been locked in negotiations with the European Union, the European Central Bank and the IMF, seeking to unlock 7.2 billion euros worth of remaining bailout funds that the creditors are refusing to release unless Greece signs up to certain economic reforms.

With the two sides standing firm on their positions and Tuesday's payment to the IMF due, the government was informed last week by Greece's central bank chief Yannis Stournaras that it could draw 660 million euros from a special account held at the IMF, like all member states.

That account holds Greek reserves and is only meant to be used in cases of "extraordinary need", the central bank source said, adding that subsequent meetings with government officials and the IMF led to the release of the funds.

The source added that it was not the first time that Athens was tapping into the fund, but that in previous cases smaller sums were withdrawn.

Greece would be required to replenish those funds as soon as possible, experts said.

The remainder of the sum due to the IMF was scraped together by the government.

In Washington, the IMF confirmed receipt of the repayment, declining to give further details.

- 1.5 bn euros due in June -

Even though it narrowly averted default on Tuesday, Greece faces a punishing debt repayment schedule in coming weeks.

Around 1.5 billion euros are due to the IMF in June and then more than six billion euros to the European Central Bank (ECB) in July and August.

"While the Greeks may have stumped up some cash to appease their creditors in the short term, unless they can get through the current impasse and reach agreement on austerity measures, markets will remain jittery," said Mike McCudden, head of derivatives at stockbroker Interactive Investor.

Underlining the magnitude of the emergency, Greece's government said in a statement Tuesday that local authorities and public agencies turned over 600.3 million euros following its decree ordering them to transfer their reserves and help the state cover its short-term financial obligations.

However, analysts like Credit Agricole's Frederic Ducrozet said all these warnings are "clearly part of the negotiation".

"Because as long as there is money to repay the creditors, there will be no deal," he said.

Prime Minister Alexis Tsipras has called on Greece's creditors for an "honourable compromise," and the hard-left government reportedly plans a number of concessions to win them over.

These include a new VAT rate, along with a restriction on early retirement and an unpopular property tax that would enable the government to save billions of euros as demanded by its creditors.

German Finance Minister Wolfgang Schaeuble on Tuesday said the "atmosphere has improved" in the talks with Athens, but stressed that that did not automatically translate into progress in the negotiations.

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