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Greece makes IMF payment amid signs of bailout progress

world Updated: May 06, 2015 21:13 IST


Cash-strapped Greece managed to make a 200 million-euro ($222 million) repayment to the International Monetary Fund on Wednesday, as its long-stalled bailout negotiations appeared to make some progress.

The country has a much larger repayment due next week that it will struggle to manage. On May 12, Greece must repay about 770 million euros to the IMF - and it is not clear whether it will be able to meet both that payment and pay some pensions and salaries due mid-month.

Greece once more faces the possibility of defaulting on its debts in the next few weeks, which could set off a chain reaction that jeopardizes its membership in Europe's joint currency.

The country's left-wing government has been locked in negotiations with its creditors and the institutions overseeing its bailout - the IMF, European Central Bank and European Commission - for the past three months over reforms required to unlock the remaining 7.2 billion euro installment of its 240 billion euro bailout.

With no other significant external source of funding, Greece will not be able to continue meeting its debt repayments and pay for day-to-day spending without the rescue loans.

In Brussels, technical talks that started last week were extended beyond Wednesday amid hopes for a breakthrough. A eurozone official, who asked not to be identified because the negotiations were ongoing, confirmed that there was now visible progress after the talks had been bogged down for weeks.

Prime Minister Alexis Tsipras spoke by phone with European Commission President Jean-Claude Juncker Wednesday, and both said that "constructive talks should continue."

They issued a joint statement saying the two discussed "progress made in the talks ... over the last few days" and spoke of details of the reforms Greece needs to implement.

According to the statement, those include modernizing the pension system "so that it is fair, fiscally sustainable and effective in averting old-age poverty." They also discussed "the need for wage developments and labor market institutions to be supportive of job creation, competitiveness and social cohesion."

Finance Minister Yanis Varoufakis was in Rome to discuss the issue with his Italian counterpart Pier Carlo Padoan, before heading to Madrid on Friday to meet his peer Luis de Guindos.

Both sides hope to make progress by May 11, when eurozone finance ministers are due to meet. But expectations of a deal being reached by then have faded.

On Tuesday, a government official in Athens attributed the latest snag in negotiations to disagreements between the IMF and European Commission on how to handle the Greek crisis.

Facing an acute liquidity problem, the government has already ordered state enterprises, including municipalities and schools, to transfer their reserves into a Bank of Greece account where they can be used as a loan by the state.

Wednesday's repayment of interest on IMF's loans was made without any problems. "The payment is proceeding normally," a finance ministry official said, on condition of anonymity in line with government regulations.