Greek political unrest and deepening debt crisis fuel talk of snap election

Helena Smith in Athens and Jennifer Rankin Monday 6 April 2015

Yanis Varoufakis assures IMF’s Christine Lagarde that Athens will repay €450m loan on Thursday as pressure mounts over slow-moving negotiations

The Greek finance minister, Yanis Varoufakis, during a parliamentary session in Athens on Thursday. He was scheduled to meet the IMF’s managing director, Christine Lagarde, in Washington DC on Sunday. Photograph: Alkis Konstantinidis/Reuters

Greece has confirmed it will this week repay a €450m (£330m) International Monetary Fund, as the worsening Greek debt crisis has reanimated talk within the ruling Syriza party of a snap general election if ongoing discussions with creditors fail.

The Greek finance minister, Yanis Varoufakis, held informal talks with the IMF’s managing director, Christine Lagarde, in Washington DC on Sunday, and Lagarde said he confirmed that the repayment would be made on Thursday.

Greece says it will make €460m bailout repayment to IMF on time Athens moves to quell fears of a default after a series of contradictory statements by saying it is ready to make the repayment on time on 9 April

Meanwhile, warnings of early elections underscored the political unrest in Athens. Varoufakis told the Naftemporiki newspaper on Monday that Greece must reach an outline funding agreement with its lenders at a meeting of euro zone finance ministers on 24 April.

The slow pace of negotiations with creditors and worsening state of the Greek economy brought a warning from the far-left Syriza of snap polls being held before the summer – just months after winning power.

“If we are not satisfied [with the outcome] we will go to the people,” Kostas Chrysogonos, a prominent Syriza MEP told local media at the weekend. “We have a popular mandate to bring about a better result,” he said of the talks aimed at concluding a reform-for-cash programme to keep the crisis-hit country afloat. “If, ultimately, creditors insist on following an inflexible line … then the electoral body will have to assume its responsibilities.”

Varoufakis said following his unexpected meeting with Lagarde that Greece “intends to meet all obligations to all its creditors, ad infinitum”. He said the government also plans to “reform Greece deeply” and to try to improve the “efficacy of negotiations” with its creditors.

“I welcomed confirmation by the minister that payment owing to the fund would be forthcoming on 9 April,” Lagarde said in a statement.

Senior government officials have recently had to repeat assurances that Greece is not about to to default on debt repayments. The deputy finance minister, Dimitris Mardas, said civil service wages would also be paid. “There is money for the payment of salaries, pensions and whatever else is needed in the next week.”

The prospect of renewed political strife in Greece coincided with mounting dissent within Syriza over the extent to which it should roll back on pre-electoral reforms.

The anti-austerity government led by Alexis Tsipras has found itself increasingly cornered with creditors – the so-called troika of the IMF, the European Union and the European Central Bank – refusing to endorse proposed reforms under an extension of its €240bn (£176bn) bailout. Militants led by energy minister Panagiotis Lafazanis have ratcheted up the pressure by rejecting any notion of making necessary concessions starting with privatisations.

On Sunday, Lafazanis denounced Greece’s international creditors for treating the country with “unbelievable prejudice and as a colony”. Raising the prospect of a deal with Russia, he said: “A Greek-Russian agreement would help our country greatly in negotiations with lenders.”

Athens was believed to harbour hopes that the IMF – which has proved to be a more conciliatory partner than either the EU or ECB in negotiations – would agree to cut the government some slack in Sunday’s talks. On Friday, Syriza’s parliamentary spokesman, Nikos Filis, piled on the pressure, saying Tsipras’s leftist-led coalition would prefer to pay salaries and pensions than bondholders if forced to make a choice.

According to the Greek finance ministry statement, the talks between Lagarde and Varoufakis were to be an “informal discussion of Greece’s reform plan”. A further round of meetings between Varoufakis and US Treasury officials was planned for Monday.

Investors have been getting increasingly nervous that Greece will default on the 9 April repayment, amid rumours that the Syriza-led government is running out of cash.

Greek officials denied these rumours and criticised leaks from the EU institutions suggesting that Athens would be unable to meet its obligations to the IMF as a “deliberate rumour campaign”.

Negotiations between Greece and its creditors over the next tranche of the country’s bailout – worth more than €7bn – have stalled over disagreement about Syriza’s economic reform plans. Greece has not received any bailout funds since August last year, and the Syriza-led government has so far failed to convince its Eurozone partners to dole out remaining funds in the bailout pot.

Eurozone deputy finance ministers will discuss Greece’s proposals on Wednesday and Thursday, but are not expected to reach an agreement.

A teleconference between the same group last week ended in stalemate after Greece refused to implement reforms agreed by the previous government that would have broken pledges Syriza made when it was elected in January. Eurozone finance ministers, including Germany’s Wolfgang Schäuble, said Greece could only get the remainder of the funds if it agreed to reforms, such as cutting pensions. But Greece insists it can raise money through “non-recessionary” measures, such as a clampdown on tax avoidance.

EU officials told Reuters that progress had been made, but more work was needed to reach a deal. Hopes of a breakthrough are now being pinned on the next meeting of Eurozone finance ministers on 24 April.

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