Markets hit as Greece letter shows just how close it came to defaulting on a €750m IMF payment

Emma Haslett
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A so-called "Grexit" is looking increasingly likely (Source: Getty)

The FTSE 100 started the day on a positive note, edging back above the 7,000 mark - but that was quickly curtailed, after the publication of a letter from Greek prime minister Alexis Tsipras to International Monetary Fund (IMF) chief Christine Lagarde showed just how close it came to defaulting on a €750m (£544m) payment last week.

In the letter, first reported by Greek paper Kathimerini and the FT, Tsipras warned Lagarde Greece would not be able to repay the IMF without financial aid. The letter was shown to IMF officials by Lagarde on Thursday, the FT said.

Eventually, Greece did pay - but only by dipping into a little-known emergency account which "effectively cleaned out one of its last cash reserves available", said IG analyst Chris Beauchamp.

Greece's next payment, a €300m tranche due to the IMF on 5 June, is looking increasingly shaky, particularly given reports Poul Thomsen, the IMF's European chief, has reported that negotiations remain unproductive.

Thomsen is reported to have said the IMF may have to withhold the €3.6bn it has pledged to Greece - although, as Beauchamp pointed out, "given [Greece's] ability to keep pulling rabbits from hats", it may be able to find the funds.

In mid-morning trading the FTSE 100 was just shy of the 7,000 mark, 0.41 per cent up on Friday's close. Germany's Dax was 0.86 per cent up, while France's Cac rose 0.17 per cent. The euro fell 0.57 per cent against the dollar, to $1.1386.

"Greece concerns could result in additional Euro selling," said Peter O'Flanagan, head of foreign exchange trading at ClearTreasury.

"Tspiras last week said [he is] unwilling to compromise on key demands, if this continues his hand may be forced, or the worst case scenario will be realised and Greece will have to leave the Eurozone."

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