UPDATE 2-Greece says IMF undermining bailout talks as pay day looms

(Updates throughout)

ATHENS/BRUSSELS, April 27 (Reuters) - Greece accused the International Monetary Fund on Wednesday of undermining negotiations over the release of more bailout funds needed in the next few weeks to repay debt.

At issue is what measures Athens would take if it fails to reach fiscal targets by 2018. Creditors, including the IMF and European institutions, want those measures made law immediately.

Athens argues that its constitution precludes legislation on a hypothetical event but it has offered to discuss a mechanism of automatic cutbacks.

Government spokeswoman Olga Gerovasili told reporters that the IMF had not accepted the proposal.

“The IMF is making demands which go beyond what was agreed,” Gerovasili said, referring to a 86-billion-euro ($97-billion) deal struck last year and talks to unlock more than five billion euros in bailout funds needed to pay EU and IMF debts by July.

“These demands undermine efforts by both the Greek government and European institutions,” she said.

An IMF spokesman in Washington said the institution had no immediate comment on the matter.

Greek Prime Minister Alexis Tsipras wants the European Union to call a summit of euro zone leaders to break the impasse. On Wednesday he communicated his “displeasure” to European Council President Donald Tusk over the IMF’s behaviour, his office said.

Euro zone finance ministers had pencilled in a tentative meeting on Greece for April 28, but cancelled it after progress in talks with Athens proved insufficient, triggering a drop of 2.5 percent in Greek shares fell 2.5 percent and 50-basis-point spike in 10-year bond yields, one of the biggest for weeks.

Tusk said euro zone finance ministers should set a date for a meeting on Greece within days to avoid renewed uncertainty over its ability to finance itself. But one official close to talks said the window for action was getting narrower.

“There is a perception that if no deal is reached in the next week or two, everything will be postponed until after the Brexit vote,” the official said, referring to a British referendum on whether to stay in the EU.

“The crisis of the summer of 2015 is on people’s minds,” Beta Securities chief trader, Takis Zamanis, said, referring to Greece almost being thrown out of the euro zone.

The Greek government is using cash surpluses deposited by public sector entities to pay its bills because of delays on a bailout review, officials told Reuters on Tuesday.

“No deal is causing uncertainty that the country could again be led to a situation where it won’t be able to cover its (financial) obligations,” Zamanis said.

But a jaded public shrugged off the latest twist in a convoluted and long-running drama.

“Why should I worry? The country is already broke,” pensioner Stamatis Mitsikoulis said as he sat in an Athens cafe. (Writing by Michele Kambas; Editing by Louise Ireland)