Central Banks

Tuesday, May 26, 2015 - 02:31

ESM Regling: Failed IMF Payment By Greece 'Dangerous' - Press

-- Regling: Athens faces default soon without agreement

FRANKFURT (MNI) - European Stability Mechanism Managing Director Klaus Regling said in an interview published Tuesday that a failed interest repayment by Greece to the IMF would be "dangerous" without specifying how the ESM, one of Greece's largest creditors, would react.

Regling also told the daily Bild that Greece will likely default soon if it cannot achieve a deal with its creditors.

Markets are generally unsure if a failed IMF repayment would trigger default clauses in other debt contracts, with the reaction of the ESM generally seen as an important bellwether.

Greece has obtained E130.9 billion from the ESM in loans thus far, according to Regling.

"Time is running out [for Greece]," Regling. "Greece is not going to get any new money without an agreement with its creditors. It then faces a government default."

However, if Athens agreed to reforms, then sufficient funds could be made available, Regling also said.

"If an agreement is achieved and all euro member states approve it, Greece could could get the last credit tranche worth E1.8 billion from us and another E1.8 in central bank profits relatively quickly," Regling said.

He added that another E3.6 billion are available from the IMF.

Regling also emphasised that the ESM even had enough money for a third aid program if Greece only implemented reform.

"It's now about the successful conclusion of the current program. Only then can it be assessed if further aid is necessary," he said. "The ESM has enough financing possibilities for all eventualities. This is important to calm the markets."

Addressing the potential withdrawal of the IMF from further Greece aid, Regling emphasised the Fund's "decades of experience" in helping financially distressed governments and said that was why Germany and other euro member states would like the IMF to stay involved with Greece.

--MNI Frankfurt Bureau; tel: +49 69-720-142; email: sarons@mni-news.com

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