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default fears loom as Greek economy teeters on brink

Published:Tuesday | May 12, 2015 | 12:00 AM

Brussels, Belgium (AP):

Greece may have only a couple of weeks left before it faces real problems meeting its financial commitments, the country's finance minister conceded Monday as talks with European creditors dragged on without agreement.

Following a meeting with his peers in the 19-country Eurozone, Yanis Varoufakis said Greece was being strangled by a liquidity problem that could become "binding" in a couple of weeks.

"The liquidity issue is an incredibly urgent issue," he said. "Let's not beat about the bush and pretend otherwise ... . It seems to me that from the perspective of the time frame that we are facing, we're talking about the next couple of weeks."

Greece is facing an acute cash crunch that many in financial markets think could see the country default on its debts, put up restrictions on capital flows, and possibly leave the euro currency. It's one of the great uncertainties surrounding the global economy.

For more than three months, Greece and its creditors have been trying to agree on a list of reforms and budget measures to get a bailout loan - worth €7.2 billion (US$8 billion) - that will help it pay upcoming debts as well as meet its day-to-day obligations on things like wages and pensions. The latter are thought to be around €1.5 billion through this month.

Given the absence of that money, Greece has been relying on its own resources and has even resorted to scraping together enough reserves from local governments and state entities like hospitals.

talks back on track

Those measures have helped it meet both internal and external commitments over recent weeks. And yesterday, the country authorised a debt repayment worth €757 million (US$844 million) to the International Monetary Fund due Tuesday.

The talks with creditors appeared to get back on track yesterday following a fairly acrimonious meeting in the Latvian capital of Riga last month.

The Eurozone's top official, Jeroen Dijsselbloem, said progress was made at the meeting in Brussels but that "more time and effort" was needed to reach a deal.