Greece must stay in euro but work to avoid default: German economic adviser

[May 27, 2015]  By Reinhard Becker

BERLIN (Reuters) - Greece must remain a member of the euro zone but it must stop wasting time and do all it can to avoid defaulting on its debts to the IMF, the head of the panel of economic experts that advises the German government said.

"Greece should stay in the euro zone. Because that's desirable, all the parties on the creditor side evidently want to keep that open as long as possible," Christoph Schmidt said in an interview with Reuters.

"The ball is still in the Greek government's court even though the situation has become more tense," said Schmidt, who leads a group of economic "wise men" advising Chancellor Angela Merkel's government.

"What's important now are the facts and not the cacophony," he said.

Shut out of bond markets and with bailout aid locked, Greece is running out of cash to pay its bills.

It must repay four loans totaling 1.6 billion euros ($1.8 billion) to the International Monetary Fund next month, starting with a 300 million euro payment on June 5 that is seen as the next crunch point for state coffers.

Schmidt said Athens had procrastinated and made the situation unnecessarily precarious, but he added that he refused to believe Greece would simply allow itself to default.

"The situation has become more difficult because the Athens government unnecessarily let so much time pass. The basic battleground hasn't changed at all."

"I can't imagine that the Greek government would knowingly allow (a default to the IMF) to happen," he said.

Greece said it intends to make good on its debt obligations but it needs aid urgently to be able to do so after several senior officials insisted Athens had no money to pay a loan installment falling due next week.

A growing list of senior members of the government have openly said Athens does not have the means to pay the IMF, and would prioritize paying civil servants and pensioners instead.

Greek officials have frequently threatened to default in recent weeks, arguing the country does not have cash, which euro zone officials have dismissed as a negotiating tactic to raise pressure on creditors to disburse aid.

(Reporting by Reinhard Becker; Writing by Erik Kirschbaum; Editing by Hugh Lawson)

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