European Commission warns Greece over liquidity

The European Commission has warned Greece there is "still a lot of ground to be covered" before a deal can be reached with lenders, following confirmation that Greece used its reserve funds at the IMF to meet a €750 million repayment to the Washington-based institution on Tuesday.

News that Greece tapped an emergency IMF holding account to make its payment to the lender on Tuesday has highlighted the precarious financial position of the country as it struggles to service its debts in the absence of bailout funds from its lenders.

It is understood that the troika was aware of the payment mechanism which was mooted by Greek authorities last week. The IMF declined to comment on the unusual move. Each IMF member is required to hold a buffer fund in case of emergencies, but the reserve is rarely tapped.

Greek finance minister Yanis Varoufakis said on Monday following a eurogroup meeting in Brussels that the liquidity situation in Greece was "terribly urgent."

Greece must find up to €1.5 billion to meet public sector bills at the end of this month, while around €1.5 billion is due to the IMF in June under various tranches. In addition the Greek authorities face €6 billion in repayments to the European Central Bank in July and August.

Speaking following the second day of finance ministers' meetings in Brussels yesterday, European Commission vice-president Valdis Dombrovskis said the liquidity situation in Greece remained a concern.

“We expected to finalise technical negotiations at the end of April. Unfortunately this has not happened,” the commissioner with responsibility for the euro said.

“There is still a lot of ground to be covered and because of the liquidity situation ...there is every reason to speed up these negotiations. The institutions are certainly ready to do so and to achieve progress as quickly as possible.”

Despite the lack of concrete progress at this week’s eurogroup and ecofin meetings on Greece, the European Central Bank agreed to raise the ceiling for emergency liquidity assistance to Greece again yesterday, according to reports, bringing the total to about €80 billion.

While European Central Bank president Mario Draghi attended Monday's eurogroup meeting in Brussels, he did not hold talks with Greek finance minister Yanis Varoufakis according to sources.

It is understood that ministers only briefing discussed the ongoing Greek bailout negotiations, issuing a statement after the meeting welcoming the “progress made so far,” but stating that “more time and effort are needed to bridge the gaps” on the remaining issues.

Nonetheless, EU economics commissioner Pierre Moscovici said that while there was "still significant divergence" between Greece and its creditors on a number of issues, including pensions and labour market reforms, progress had been made in other areas including VAT reform and treatment of non-performing loans.

Greece had also indicated its intention to legislate for an independent agency on tax collection, he said. He added that there was now "a new frame of mind" since last month's eurogroup meeting in Riga at which Greek finance minister Yanis Varoufakis provoked the ire of a number of euro area finance ministers, prompting Greek prime minister Alex Tsipras to sideline him from the technical bailout negotiations.

Yesterday's meeting of all EU finance ministers also marked the first visit of British chancellor of the exchequer George Osborne to Brussels since last week's general election in Britain. Speaking on his way into the meeting, the British chancellor said that Britain would take a "resolute and firm" approach in the forthcoming negotiations with the European Union about British membership.

“We go into the negotiations aiming to be constructive and engaged but also resolute and firm and no one should underestimate our determination to succeed for the working people of Britain, indeed the working people of the whole of the European Union,” the chancellor said.

It is understood the Mr Osborne met with German finance minister Wolfgang Schauble on the sidelines of the meeting and raised Britain's concerns about forthcoming EU proposals on migration.