Greece has threatened to default on €1.6bn (£1.14bn) of debt repayment due on international bailout loans next month, claiming it does not have the funds to satisfy creditors at the same time as paying wages and pensions.



The Greek interior minister, Nikos Voutsis, a long-standing ally of the prime minister, Alexis Tsipras, insisted the country was near to financial collapse. In an interview with Greek television station Mega TV he said Athens needed to strike a deal with its European partners within the next couple of weeks or it would default on repayments to the International Monetary Fund that form part of its €240bn rescue package.

Voutsis said: “This money will not be given and is not there to be given.” His comments came as the finance minister, Yanis Varoufakis, repeated his warning that the entire euro project would be undermined without a deal that proved acceptable to the Greek people. Varoufakis told the Andrew Marr show that the Syriza-led Greek government has now “made enormous strides at reaching a deal”, and that it is now up to the European Central Bank, IMF and European Union to do their bit and “meet us one-quarter of the way”.

With crucial debt payments looming, combined with the need for Athens to find around €1bn to pay public sector wages and welfare payments in the first week of June, the eurozone appeared to be entering the final chapter in its dispute with Greece. Tsipras wants the EU, ECB and IMF to release a blocked final €7.2bn tranche of the bailout without imposing tough reforms and spending cuts agreed with the previous right-of-centre administration.

Greece has spent the last four months wrangling with Brussels and the IMF following the election of the anti-austerity Syriza party in January. While some senior figures at the EU Commission and IMF have urged greater flexibility from creditors — and Greek ministers have appeared to drop demands for a higher minimum wage — both sides have so far failed to find a compromise deal.

Tsipras has attempted to persuade Angela Merkel to strike a broader deal that includes the refinancing of the entire bailout package in return for commitments to tackle tax avoidance and a re-making of the Greek welfare system, without success.

Syriza’s domestic position was bolstered on Sunday by a poll that showed cash-strapped Greeks remain supportive of the government’s tough negotiating stance, though they rejected a return to the drachma, saying that any deal with creditors must retain the euro as the Greek currency. The poll conducted in May by Public Issue, for the pro-government newspaper Avgi, showed 54% backing the government’s handling of the negotiations despite concerns that the country has been taken to the brink of financial collapse.

A total of 59% believe Athens must resist demands by creditors for further austerity measures, with 89% against pension cuts and 81% against mass lay-offs. Aware that broad electoral support for his government could collapse without a deal that retains the euro, Tsipras warned his far-left supporters, many of them newly elected MPs with little experience of EU negotiations, that they must compromise in talks with creditors.

In a speech to his party’s central committee on Saturday, reported in the Greek newspaper Kathimerini, Tsipras said Greece is in the final stretch of negotiations and is ready to accept a “viable agreement” with its creditors but not on “humiliating terms.” He ruled out submitting to what he described as irrational demands to apply a 23% VAT rate across the board and further labour reform. Echoing Varoufakis, he called on lenders to make “necessary concessions”. He said: “We have made concessions but we also have red lines.”

In a barely veiled reference to Berlin, Tsipras told the committee that many European governments would happily see Greece fail in its talks and be forced to leave the euro. He is under pressure to agree a deal that excludes fresh austerity measures from members of the hardline “left platform” within the party, led by the energy minister, Panayiotis Lafazanis, who have refused to approve any deal that departs from pre-election promises.

Lafazanis, according to reports, has been working on a proposals to find alternative sources of funding that would allow Greece to walk away from a deal. But his search, which has included seeking cash from Russia, have drawn a blank.