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Athens and Berlin downplay possible Greek default

Greek and German officials have tried to play down the possibility of a default by Athens on a looming €300m loan instalment owed to the International Monetary Fund despite mounting evidence that the country is running out of cash.

Finance minister Yanis Varoufakis told reporters on Tuesday he expected a June 5 payment deadline to be met because “we will have an agreement (by then)” but gave no details of how bailout negotiations being held in Brussels were progressing.

A senior German official also sought to calm the concerns triggered by the weekend threat by Nikos Voutsis, the hardline Greek interior minister, to default because “the money…isn’t there to be given”.

Varoufakis said new tax measures to plug a projected €3bn fiscal gap this year were being considered but ruled out imposing a levy on domestic bank deposits and transactions at cash machines.

“Taxing bank transactions was proposed at the Brussels talks. The finance ministry disagreed and the proposal was withdrawn,” he said.

The combative finance minister was removed as Greece’s chief negotiator by premier Alexis Tsipras following pressure from creditors, only to reappear this week with an upbeat message that a deal would be struck.

In Berlin the German official said there was no reason to believe Greece would default on June 5.

The debt is the first of four loans totalling €1.6bn Athens is due to repay to the IMF next month. If no deal is reached with the EU and IMF for new loans to be disbursed to Athens, Greece is likely to default on the IMF loan repayment.

Budget execution figures for the first four months indicated Athens cut spending by some €2bn to cover previous IMF loan instalments while at the same time keeping up with monthly payments to pensioners and public sector workers.

The finance ministry raised a similar amount by diverting cash reserves held by local authorities, pension funds and other state entities to pay the IMF.

The German official said it was “encouraging” Greece had signalled its readiness to meet the IMF obligations.

“I find it encouraging, if it is true, that the Greeks signalled yesterday their desire to repay the 300 million euros to the IMF on June 5,” the official said.

“I think there is reason to believe that we will not be talking about a default situation around June 5, neither before or immediately thereafter.”

But Pierre Moscovici, EU financial affairs commissioner, said the talks between Athens and its creditors needed to be speeded up if they were to reach an agreement that would keep Greece in the eurozone.

“We are aware of the liquidity problems in Greece and that is why it is so important now that negotiations taking place in Brussels need to be speeded up. We want that agreement, we want it fast, we are working hard on it,” he said at an event in Dublin.

“There is no Plan B,” he added. “There is no plan other than Greece remaining in the eurozone.”

source: Financial Times