Trouble Brewing: Greek Tragedy Mark Two?

Fotis Kouvelis, leader of the Greek Left Democratic party (DIMAR), leaves after a meeting with Greek Prime Minister Antonis Samaras
Fotis Kouvelis, leader of the Greek Left Democratic party (DIMAR), leaves after a meeting with Greek Prime Minister Antonis Samaras

Greek stocks tumbled 6 percent on Friday, falling to a six-month low, as the country faced yet another political crisis, compounded by rumors of a suspension of bailout money from the International Monetary Fund.

Officials involved in the management of the Greek bailout told the Financial Times on Friday that the organization could suspend aid payments to Greece by the end of July due to a 3-4 billion euro shortfall in the 172 billion euro rescue program.

The shortfall is because euro zone central banks refused to roll over the Greek bonds they hold and the possibility that privatization plans in Athens were falling behind schedule, the newspaper said.

Greek stocks fell on the news and the yield on 10-year government bonds rose to more than 11 percent.

But David Lipton, the deputy managing director of the IMF told CNBC at the St. Petersburg International Economic Forum that the story was "premature".

"We are still having discussions with Greece. Provided that we can reach agreement with them before the end of July, there's financing for the subsequent year," he said.

(Read More: Greece Aid Suspension Talk 'Premature': Senior IMF Official)

The rumors come amid a new political crisis in Athens. Reuters cited sources as saying that the Democratic Left party (DIMAR) party agreed on Friday morning to leave the coalition government after talks to resume the state broadcaster, ERT, collapsed last night.

DIMAR was angered when ERT was shut down last week and met Friday morning to determine whether the party would continue to back Prime Minister Antonis Samaras.

Samaras said last night he would press ahead with his administration regardless of their decision.

Samaras cut ERT off air as he sought to roll back the public sector to show Greek lenders that he was sticking to plans to cut costs as part of the bailout.

His conservative New Democratic party, along with its Socialist PASOK ally, jointly have 153 members in the Greek 300-seat parliament, a majority of three which means he can still govern without the 14 members of DIMAR.

All sides have ruled out snap elections.

(Read More: From Developed Back to Emerging: Greece's Full Circle)

Wolfango Piccoli, managing director at Teneo Intelligence, believes DIMAR's announcement constitutes a major setback for Prime Minister Samaras. However, a collapse of government was unlikely.

"Despite the ongoing political upheaval," Piccoli wrote, "it is unlikely that the government will collapse in the short run (a scenario that would make it almost impossible to avoid early elections).

"However, the political backdrop is now set to become more unstable, thereby increasing the risk of early elections in the medium term."

David Lea, a senior Europe analyst at Control Risks, concurs that a collapse is unlikely and political turmoil isn't really that unexpected in Greece.

(Read More: Greece, Cyprus May Be Forced to Exit Euro: Citi)

"A political crisis wouldn't look good to the Troika but then again, I don't think anybody really expected the current government to last half its term and it's a quarter of the way through at the moment," Lea said.

Lea said the political situation in Greece would not dramatically affect the ongoing issues with IMF targets: "I use the analogy of a rubbish racehorse in the Grand National. It trots around fifty yards from everybody else and doesn't jump very well but somehow always finds a leg when it's landing. Greece is a bit like that.

"At the moment, I can't see a collapse. Unless that happens, I don't see much deviation."

Lea argues that the IMF is unlikely to suspend its aid package, believing that Greece would always lag behind its targets by a few months.

"While they are not completely on target, they are always getting there just enough to ensure no one gets angry at them," Lea explained, adding, "I don't see the Troika taking a bit of a nuclear option when things are relatively quiet and the concept of a 'Greecovery' is in play, even if it is significantly exaggerated."

Piccoli agreed, stating, "The IMF is flexing its muscle to put pressure on Greece and its European counterparts to conclude the ongoing review by the end of July, but it is unlikely to make any major problems about the next aid payout for Athens."