Greece Ends the Money at the Beginning of June

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The Prime Minister Lucas Papademos warned that the country may stop servicing its external debt obligations

Greece will not be able to service the obligations of the State from the beginning of June. This warns the Prime Minister Lucas Papademos  in a letter to the President of the country  Karolos Papoulias, submitted by him yesterday after the summit of the political leaders, reported the Greek radio ‘ Sky ‘.

Possible Moratorium on debt?

He states in the letter that there is no immediate danger for the payment of salaries and pensions for the month of May, but the political stability must be restored immediately. The letter emphasizes on the dangers for the states’ public finances and on the possibilities for payment or non-payment of its bonds obligations maturing in June. Tomorrow, the Greek Government must decide whether to pay these bonds obligations.

At the same time the Euro Area warned Greece that it will not continue further financing of the country before Government formation, with which to negotiate.

“There is no time, “said the President Papoulias to the political leaders, which he summoned over the weekend to negotiate creation of coalition Government. He gave them copies of the letter of the Prime Minister Papademos, containing data for the true condition of Greek banks and public finances.

 The ECB will not refinance Greek banks any more

European Central Bank (ECB) would not support bankrupt Greek banks, announced the radio Sky. “The ECB will not provide extraordinary liquidity for the Greek banks, which are facing bankruptcy,” said Luc Coene, Member of the Management Board of the European Central Bank (ECB) and the Governor of the Belgian Central Bank, answering the question whether political crisis in Greece may lead to coordinated bankruptcy of the country.

Luc Coene added that further buying of government bonds by the ECB will not help and that the Greek Governments needs to implement structural reforms to regain investor confidence. “It is possible the ECB to reduce further its forecasts for growth of the euro area in June,” added Mr. Coene.

At the same time the negotiations for a coalition Government formation failed again. The radical Left Alliance Party (SİRİZA) refused to participate or to support a possible transitional cabinet.

Greece again failed to reach agreement for the establishment of a coalition government, even after Sundey’s meeting with the President Papulas with the leaders of the three leading parties, which received the majority of votes at the parliamentary elections: the ‘ New Democracy ‘, SIRIZA, and PASOK. The meeting continued less than two hours and it has not achieved any result. The leader of the radical left alliance SIRIZA Alexis Tsipras added that SIRIZA will not accede or support any coalition Government, which supports the survival plan. According to sociological studies, the Party of Tsipras would receive the majority of votes if new elections are scheduled and conducted.

Opinion polls show that the majority of Greeks are against the survival plan, but want to retain the euro. However, senior officials in the EU noted that if the next Greek Government throws back the survival plan, the country will not receive further financial assistance, which would help it to avoid bankruptcy and to stay in the euro area.

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