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Greek debt default looms again -

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MICHAEL BRISSENDEN: The financial crisis in Greece has been simmering in the background in recent weeks and months, but now it's putting the financial world on edge once again.

Greece says it's broke and won't be able to meet a critical debt repayment next month to the International Monetary Fund (IMF).

The prospect of a debt default renews speculation that Greece might leave the Euro currency, or get kicked out.

With more I'm joined by our business editor Peter Ryan.

Peter, so how close is Greece to defaulting on its debt repayments?

PETER RYAN: Well, Michael, Greece is obliged to repay $ US 1.8 billion - that's 1. 6 billion euros - to the IMF in June. The first instalment is due late next week.

Now Greece says it wants to make good on its obligations and doesn't want to default, but is already running out of cash to pay its bills. That includes wages for public servants and also pensions.

This is a high stakes negotiating game as Greek officials try to cut a better deal with creditors who are demanding more economic reforms in return for more emergency cash.

But with the debt deadline days away Greece's interior minister Nikos Voutsis told Greek TV the country is broke and isn't in a position to pay up.

NIKOS VOUTSIS (translated): I want to be very honest, $1.6 billion euros are the full instalments in June for the IMF. This money will not be given and is not there to be given.

This is known and we are talking on the basis of the optimism that we have - cautious optimism, but optimism none the less, that there will be strong agreement that will allow the country to breathe.

MICHAEL BRISSENDEN: That's the Greek interior minister Nikos Voutsis.

And, Peter, Greece doesn't get a better deal from its creditors and defaults - if it doesn't get a better deal, what happens then?

PETER RYAN: Well, Greece is locked out of financial markets until the debt repayment is resolved. Already the IMF's managing director Christine Lagarde has warned an extension won't be granted and no development nation has defaulted on the IMF in 30 years.

Greek debt is also considered as junk by the major ratings agencies and already is in a technical state of default.

The big problem though for Greece is that two weeks after it defaults on a repayment, the IMF declares a cross default or a cross acceleration - that's where other creditors like the European bailout fund would declare an immediate repayment of their loans, so things start really ramping up then.

But would this be enough to see Greece kicked out of the eurozone?

The Greek finance minister Yanis Varoufakis says the EU, the IMF and the European Central Bank will keep doing whatever it takes to stop the eurozone from fragmenting.

YANIS VAROUFAKIS: It would be a disaster for everyone involved. It would be a disaster primarily for the Greek social economy, but it would also be the beginning of the end of the common currency project in Europe.

Once you put, infuse into peoples' minds, into investors' minds, the idea that the eurozone is not indivisible, it will only be a matter of time before the whole thing begins to unravel.

MICHAEL BRISSENDEN: The Greek finance minister Yanis Varoufakis.

And Peter, how are financial markets reacting to this news again of a Greek debt default?

PETER RYAN: Well until now markets have been numb - mainly because the consequences of a Greek exit are less serious now than a few years ago.

The big impact is being felt by the Greek banks, which rely on government guarantees, and they're bleeding deposits as investors move their money somewhere safer.

Greece's big banks were down heavily today. The main market indicator in Athens was down more than 3 per cent and that trend looks like to continue as the uncertainty remains.

MICHAEL BRISSENDEN: Business editor Peter Ryan there.