Fear of Greek default mounts as search for deal continues

Yields on 10-year Greek debt rise to highest level in two years ahead of pivotal meeting

The IMF ruled out granting Greece permission to defer debt repayments. The fund’s managing director Christine Lagarde said that an advanced economy had never asked for a payment delay. Photograph: Andrew Harrer/Bloomberg

Yields on 10-year Greek debt rose to their highest level in two years on Thursday amid fears the country is moving closer to default as it struggles to strike a fresh reform deal with lenders ahead of a key eurogroup meeting next Friday.

The yield on 10-year paper rose to 12.6 per cent – the highest level since April 2013 – on Thursday, after credit-rating agency Standard & Poors cut Greece’s credit rating to CCC+.

The IMF also ruled out granting Greece permission to defer debt repayments to the agency. Speaking in Washington at the IMF spring meetings, managing director Christine Lagarde said an advanced economy had never asked for a payment delay.

Thousands of miners with their families and supporters protesting in Athens yesterday. Photograph: Getty Images

Delayed payment

“We never had an advanced economy actually asking for that kind of thing, delayed payment, and I very much hope that this is not the case with Greece. I would certainly, for myself, not support it,” she said. Her comments followed reports the Greek government had unsuccessfully requested permission to withhold its scheduled debt repayment to the Washington-based institution earlier this month.

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Greece is due to repay about €200 million to the IMF on May 1st and a further €750 million on May 12th. Speaking in Washington Greek finance minister Yanis Varoufakis said that Greece was keen to reach a deal, but stressed that it must be “the right one”.

“We will compromise . . . to reach a speedy agreement, but we will not be compromised,” he said, adding that Greece had taken a hit for the euro zone.

The Greek finance minister also criticised the ECB's decision to stop accepting Greek debt as collateral in February and called on the European Investment Bank to fund a new investment plan for Europe. Speaking in Brussels, a European Commission spokesman said Greece had not yet produced the full list of reforms demanded by EU leaders last month. "At this stage, we are not satisfied with the level of progress. Everything is now on the table and what we need is to progress swiftly."

As technical discussions between Greek officials and creditors continued in Brussels and Athens, Greek prime minister Alexis Tsipras expressed confidence an agreement could still be reached by the end of this month. "Despite the cacophony and erratic leaks and statements in recent days from the other side, I remain firmly optimistic that there will be an agreement by the end of the month," he told Reuters, noting Europe "has learned to live through its disagreements, to combine its parts and move forward".

Draft agreement

The comments came a day after German finance minister Wolfgang Schäuble suggested a deal may not be reached at next week’s eurogroup meeting in the Latvian capital, Riga. Finance ministers from the euro zone’s 19 member countries will gather next Friday for two days of meetings, which are expected to be dominated by Greece. Officials are working towards securing a draft agreement ahead of Riga. The Greek government has previously indicated the country could run out of cash by the end of the month.

Speaking in Washington, Belgium's finance minister, Johan Van Overtveldt, became the latest euro zone finance minister to voice opposition to any major concessions for Greece. "I think what we are doing at the moment is the only option we have. It's also the best option for the Greek economy."

Suzanne Lynch

Suzanne Lynch

Suzanne Lynch, a former Irish Times journalist, was Washington correspondent and, before that, Europe correspondent