The interior minister of Greece sent the euro lower on Monday morning after delivering a message over the weekend that the country is unlikely to make good on its next tranche to the International Monetary Fund (IMF).
The ailing Southern European economy is not going to be able to meet its pension and wage obligations as well as repay the €1.6bn it owes the IMF.
He reiterated that the country was getting pressured by its creditors to accept unfavorable conditions and speaking to a Greek TV station over the weekend stated, “There isn’t any money to be given.” The terms which creditors are pressing Greece to accept continue to be unacceptable to the current leftist government, while the banking system in the country continues to take out emergency liquidity loans from the European Central Bank (ECB).
The bailout program of the country is on hold after a new government was elected earlier this year. The Syriza party singled out New Democracy, which was mandated in 2011 to strike a deal with creditors in order to avert default.
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Capitalizing on the austerity fatigue of Greek voters, Syriza promised that it would manage to strike a better deal with creditors while remaining in the Eurozone. While it did sound appealing, the negotiations with creditors undertaken by new finance minister Yanis Varoufakis have failed to yield any result, with both parties throwing accusations about the inflexibility of their counterparty.
Back in May, in a letter to the International Monetary Fund, Mr. Tsipras stated that Greece would miss its €750m repayment due in May. After the country’s account at the IMF itself was tapped, the obligation was met, but the issues remained.
The repayments are due in four installments totaling about €300 million between June the 5th and June the 19th.
The Greek government stated in the past that its obligations to the country’s workforce and pensioners were its primary concern and apparently those will be met in June.
Talks between Greece and its creditors are due to resume on Tuesday in Brussels. The two main problems to tackle are the pension reform and the Value Added Tax (VAT). The country has to present its plans about scrapping early retirement, stop subsidizing pension funds and reasess the VAT tax.