The Prime Minister of Greece, Alexis Tsipras had confirmed at one time that Athens would not repay its foreign debts in May. The total debt that had accumulated into the account of Athens accounted to 750 million euros. He had put a condition though that stated that if the creditors provide immediate liquidity, the government might think of repaying the debt.
However Athens made its pending May 12 payment by using its International Monetary Fund holding account. According to the European sources, Tsipras had made a threat about non repayment of debt in a letter written to European Commission President Jean Claude Juncker, IMF head Christine Lagarde and ECB President Mario Draghi. He sent the letter on 8 May.
The letter sent by Tsipras said that Greece was facing a deficit in terms of domestic sources of liquidity. The domestic and foreign debt obligations have been met by Greece despite receiving any respite under its 240 million euro bailout since last August.
In order to restore the liquidity, Tsipras has proposed the ECB to raise the treasury bill insurance ceiling of Greece. ECB bought Greek Bonds in the year 2010 and hence, ECB owes Greece 1.9 billion Euros in profits. It also needs to return 1.2 billion Euros when it comes to the euro zone’s bailout fund.
The letter written by Tsipras was conceived as a bluff played by the Prime Minister of Greece and it has caused a situation of possible cold war among the two sides.
The cash reserves of the country are depleting and the government needs to find a quick solution over cash for reforms deal. However, it has been fraught for months with so much delay.
Tsipras said on Friday that the two sides were meeting on a common ground but the government was in no mood to back away from its red lines like ‘no depreciation in wages and pensions.