As Greece orders IMF repayment despite cash crunch, bailout deal with creditors still elusive

BRUSSELS – Greece has made progress in talks with creditors but “more time and effort” is needed to reach a deal to give the country the money it needs to avoid default, the eurozone’s top official said Monday.

Jeroen Dijsselbloem said after a meeting of the eurozone’s 19 finance ministers that “important progress” is being made in the negotiations. However, he said “more time is needed to bridge remaining gaps” to reach a deal on the reforms Greece must make in exchange for more loans.

“There are time constraints and liquidity constraints and hopefully we will reach an agreement before time runs out and before money runs out,” said Dijsselbloem.

Greek Finance Minister Yanis Varoufakis indicated that Greece may not have more than a couple of weeks before the country’s liquidity issues become “binding.”

Greece is facing a cash crunch that could see it go bankrupt within weeks and possibly leave the euro currency. It has for over three months been trying to agree on a list of reforms and budget measures to get a bailout loan — worth 7.2 billion euro ($8 billion) — that will help it pay upcoming debts.

Earlier Monday, Greece said it had given the go-ahead to make a big debt repayment worth 757 million euros ($844 million) to the International Monetary Fund due Tuesday. But it will have trouble meeting other repayments in the following weeks.

Varoufakis said “there has been considerable convergence” in the talks over recent weeks and noted progress on issues such as privatization and tax reform. However, he said much of the progress was primarily because of concessions made by his government.

He conceded his disappointment that there has yet to be a firm agreement on the rescue loans but that discussions are taking place “in good spirits.”

Varoufakis said his discussions with his German counterpart and tough negotiator, Wolfgang Schaeuble, were the friendliest they’ve had.

In the event of a debt default, Greece could have to put controls on the flow of money through its banks and eventually even drop out of the euro altogether.

Despite three months of talks, Greece and its creditors have failed to agree on the reforms and savings Athens needs to qualify for the loan installment.

Greece hasn’t had any bailout money since last August and has relied on its own resources.

Whether Greece will default on its debts and leave the euro is one of the biggest uncertainties surrounding the global economy. Most stock markets in Europe were trading lower Monday, with Athens’ main index down 2.5 per cent.

Greece’s left-led government was elected in January on a mandate to end crippling austerity policies, blaming them for the parlous state of the economy. The budget cuts required in return for 240 billion euros worth of rescue loans contributed to a massive shrinkage in the Greek economy and the sky-rocketing of unemployment and poverty.

The Greek government has indicated it will reject any deal that doesn’t offer a credible prospect of ending its economic crisis. It has hinted at a possible referendum on any deal that runs counter to its electoral mandate.

German Finance Minister Wolfgang Schaeuble said it “could be perhaps a correct step to let the Greek people decide.”

Back in 2011, Greece’s then prime minister, George Papandreou, floated the idea of a referendum on Greece’s bailout but was rebuked by his counterparts in Europe.

“The decision lies with Greece,” Schaeuble said. “We just want to help Greece, but Greece must do its part as well.”

Dijsselbloem said it’s every country’s right to call a referendum but warned that the disbursement of bailout funds may not be made if implementation of the reforms hasn’t started.

Though conceding that a referendum is something that could be used to “elicit” the support of the Greek people on any deal that emerges, Varoufakis said it’s “not something that’s on the radar screen.”