Greece and creditors play down fears of imminent default

Greece and its Europeans creditors on Tuesday sought to play down fears that Athens would default on a payment to the International Monetary Fund next week.

Running short of cash to pay public sector salaries, pensions and debt obligations, senior members of Prime Minister Alexis Tsipras's government have said openly that Greece does not have the money to pay euro 300 million to the IMF on June 5.

The threats have spooked financial markets, which fear a default could forces Greece out of the single currency, pushing the European and global economies into uncharted territory.

Still, the government on Monday reiterated that it would try to make the payment and Finance Minister Yanis Varoufakis expressed confidence a deal with lenders would be struck in time to avoid default. Asked if Athens could make the payment, he said: "Of course, because there will be a deal by June 5." The comments drew a positive reaction in Germany, Greece's biggest creditor and one of its toughest critics in long-running aid negotiations with its EU and IMF lenders.

"I find it encouraging, if it is true, that the Greeks signalled yesterday their desire to repay the euro 300 million to the IMF on June 5," a German 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."

European Commission President Jean-Claude Juncker - who has been in close contact with Tsipras through the slow-moving talks - also expressed optimism that Athens would pay up in time.

"My impression after talking to a series of colleagues is that the feeling is growing that a default should be avoided," he told the MNI news agency. Asked how a default would affect the negotiations, he said: "The Greek colleagues have to know that we think they have to pay in June." Reflecting the slightly improved mood, a survey of mostly German-based investors showed the probability Greece leaving the euro zone in the next year has fallen to 41 per cent in May from 49 per cent in June.

Lump sum payment option
The June 5 payment is the first of four loan instalments totalling euro 1.6 billion ($1.76 billion) due to the IMF next month, and the date has turned into the next crunch point for Greece's fast-depleting cash reserves.