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Home » Featured » Greece Pays €500M in Wages as Bailout Deal Remains Elusive

Greece Pays €500M in Wages as Bailout Deal Remains Elusive

Posted by FXTimes in Featured - May 15th, 2015 4:34 pm GMT

Newly appointed Greek Finance Minister Yanis Varoufakis attends a hand over ceremony in Athens, January 28, 2015. Greece's finance minister on Wednesday said he plans to meet European counterparts to find a deal between the country and its creditors to replace the current bailout programme, stressing that one could be found without a "duel" with Europe. REUTERS/Marko Djurica (GREECE - Tags: POLITICS BUSINESS) - RTR4NAUV

The Greek government paid public sector employees on Friday, but will find it harder to pay government salaries in the weeks leading up to its debt payments to the International Monetary Fund in June, as a deal with creditors remains elusive.

Greece doled out €500 million in public sector salaries, payments the government was expected to easily make ahead of larger wage and pension commitments later this month. Earlier this week Athens tapped into emergency funds to secure a €750 million debt repayment to the International Monetary Fund.

Greece faces a tough repayment schedule in the weeks leading up to the end-of-June deadline to reach a new bailout agreement with creditors. Athens is on the hook for a nearly €300 million payment to the IMF on June 5, followed by a €335 million payment on June 12. Greece will then have to pay around €897 million the following week, including an €85 million interest payment to the European Central Bank.

Prime Minister Alexis Tsipras is looking to break the funding impasse with international creditors at next week’s European Union summit in Latvia, which was mainly designed to focus on developments in eastern Europe.

According to Greek newspaper Kathimerini, “Greek Prime Minister Alexis Tsipras plans to press fellow European Union leaders to help resolve the deadlock in talks with creditors, inserting his country’s crisis into an EU summit intended to discuss eastern Europe.”

Earlier this year Greece was granted a four-month bailout extension in order to facilitate a long-term agreement regarding the country’s debt obligations. However, Athens has been unsuccessful in unlocking bailout funds from the troika of creditors due to the government’s refusal implement tough economic reforms. Even if a deal is reached before the end of June, it is unclear whether Greece would receive the next bailout tranche of €7.2 billion that was part of the bailout extension.

The outlook on a new bailout agreement remains bleak, with Greek finance minister Yanis Varoufakis recently lamenting Athens’ decision to join the currency union in 2001.

Speaking at a conference in Athens on Thursday, Varoufakis said he wished his country still had the drachma, which served as Greece’s national currency from 1832 until 2001.

Greece’s decision to join the Eurozone “was very badly constructed,” Varoufakis said, adding that “once you are in, you don’t get out without a catastrophe.”

Greece slipped back into recession in the first quarter, the European Commission confirmed earlier this week. Gross domestic product contracted 0.2 percent in the first quarter after shrinking 0.4 percent in the final quarter of 2014. A recession in Europe is defined by two consecutive quarts of contraction in GDP.

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