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27th Sep 2020

IMF refuses to soften Greek repayment programme

  • Lagarde said Greece should 'get on with the work' of improving its economic prospects (Photo: imf.org)

A week ahead of the next Eurogroup meeting, chances for an agreement between Greece and its lenders seems to have all but faded, while a refusal, by the International Monetary Fund (IMF), to delay any loan repayments indicates tough times ahead for Athens' financial planners.

On Thursday (16 April), IMF chief Christine Lagarde ruled out giving Greece more time to pay back the €1 billion it owes to the fund in May.

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It was reported earlier in the day by the Financial Times that Greece had asked, informally, for extra time. The report was denied by the country’s finance minister Yanis Varoufakis.

"It’s clearly not a course of action that could be recommended in the current situation," Lagarde said at the IMF spring meeting, adding that delays "have been granted to a couple of developing countries, and that was not followed by very productive results".

"Our advice to the Greek government is to get on with the work of improving the short and medium-term economic prospects," she said.

The IMF refusal comes after the S&P rating agency said Greece risked default in mid-May if it fails to find an funding agreement with the Eurozone on 24 April.

In addition to the the IMF loans, Athens will have to disburse the monthly €1.5 billion it owes for pensions and civil servants' salaries, as well as €2.8 billion in bond repayments.

Greek prime minister Alexis Tsipras told the Reuters news agency on Thursday that he "remain[s] firmly optimistic that there will be an [Eurogroup] agreement by the end of the month”.

"The Greek government is working hard," said Tsipras, adding there are "already many points of convergence between the two sides".

Greece wants a "mutually beneficial solution, an honourable compromise with our partners: a compromise which will respect the recent popular mandate as well as the euro zone's operational framework," said Tsipras.

But in Brussels, the 24 April informal deadline is increasingly being seen as impossible to meet, with the new deadline, the next Eurogroup meeting on 11 May, emerging as more likely.

On Thursday, the European Commission spokesman said the executive is “not satisfied” with the progress in discussions between the Greece and the euro countries’ group, comprised of experts from the EU and the IMF.

Tsipras himself recognised that the two sides still disagree on four crucial issues.

"There remain four points of disagreement in the fields of labour relations, the social security system, the VAT increase and the rationale regarding the development of state property," he said.

"Let me be clear: This does not have to do with a technical weakness but a political disagreement, which everyone was aware of in advance," he added.

Speaking in Washington on Thursday, Varoufakis said Greece "will compromise" but will "not end up being compromised", adding that he hoped for a longer term agreement in June.

Meanwhile, yields on Greek bonds reached new highs, climbing to more than 26 percent on two-year bonds and 13 percent on 10-year bonds.

The evolution indicates growing fears of a Greek default on the markets, but could also make even more costly Greece’s next attempts to finance itself by auctioning short terms bonds.

Greece risks default in mid-May, S&P warns

Greece will be forced to default on its debts if a deal with its EU creditors is not reached by mid-May, a leading credit rating agency has said.

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Greece: too much talk, not enough vision

Wild and often contradictory remarks, delays, and internal divisions make the new Greek government a difficult eurozone partner.

Time running out for Greece, warns euro commissioner

Time is running out for Greece to broker a compromise that will allow it unlock the remaining €7.2 billion in its EU-IMF bailout needed to avoid a default, the bloc’s eurozone commissioner has said.

EU countries stuck on rule of law-budget link

Divisions among EU governments remain between those who want to suspend EU funds if rule of law is not respected, and those who want to narrow down conditionality.

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