Greece bailout: IMF chief Christine Lagarde sees progress in talks with EU

The head of the International Monetary Fund, Christine Lagarde, has become the latest participant in the gruelling Greek economic stand-off to sound an optimistic note about the prospects of a resolution.

Ms Lagarde said the IMF was making “some progress” in its negotiations with Athens. Her comments came after the Greek finance minister, Yanis Varoufakis, told Greek TV that a deal would be reached “in a week” and that leaving the single European currency was “not in our thoughts”.

The reports helped send Greece’s two-year sovereign interest rates down 123 basis points to 22.26 per cent, and 10-year yields fell 24 basis points to 10.9 per cent.

But Greece is fast running out of money and managed to make a €750m repayment to the IMF last week only by using money raided from its own account with the fund – which will shortly have to be replaced. Another €300m repayment from Athens to the IMF is due on 5 June, and Greece is running out of money to pay its own public sector workers. Unless its eurozone creditors agree to release a €7.2bn bailout tranche within the coming weeks, a default is likely.

The Greek crisis will be under discussion at the EU summit in the Latvian capital Riga on Friday. The two sides have been deadlocked over the issue of domestic economic reform, with the Syriza-led government resisting cuts to pensions and further structural labour market reforms.

However, the European Commission spokesman Margaritis Schinas sought to play down hopes of an imminent breakthrough in the talks. “More time and effort is needed to bridge the gaps on the remaining open issues,” he said. “We consider that progress is being made, albeit at a slow pace.”

Jeroen Dijsselbloem, the head of the Eurogroup of eurozone finance ministers, which must sign off on aid disbursements, said it was unlikely a deal on Greece would be struck in Riga.

“It’s not on the agenda for Friday” he told the Dutch broadcaster RTL. “I think it is unlikely.”

Separately, the euro fell against sterling and the dollar after Benoit Coeure, a member of the executive board of the European Central Bank, said he was concerned by the “rapidity of the reversal” in European sovereign bond prices in recent weeks and announced that the ECB would “slightly” step up its €60bn-a-month bond buying programme in July and August. The single currency fell 1.6 per cent against the dollar to $1.114 and against sterling it fell 0.6 per cent to £0.718.