Monday

13th Jul 2020

Greece delays IMF payment, bailout deal

Greece asked on Thursday (4 June) to bundle its four June IMF payments in one to be paid on 30 June.

This move surprised EU and IMF leaders who expected Greece to pay this Friday a €300 million installment and triggered questions over the Greek government real intentions.

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Greece was due to repay €1.6 billion to the IMF this month on 5, 12, 16 and 19 June.

It asked to benefit from a IMF provision from the 1970s allowing countries to bundle several payments in one in case of "administrative difficulty of making multiple payments in a short period".

Only one country bundled its payment in the past, Zambia in the 1980s.

The new IMF deadline on 30 June coincides with the end of the current bailout programme.

After Thursday night's meeting in Brussels between Greek PM Alexis Tsipras, EU Commission president Jean-Claude Juncker and Eurogroup president Jeoren Dijsselbloem, there was optimisim about the possibility of a quick agreement and there were talks of a new meeting on Friday night.

But it appears that Tsipras needs more time to convince his government and majority in Parliament to accept a compromise with Greece's lenders.

Tsipras will address the Parliament Friday afternoon about the ongoing negotiations and debate is expected to be heated with MPs from his Syriza party.

Jumping over Friday's IMF deadline makes the need for fresh cash less pressing and gives more time to conclude talks to unblock the last €7.2 billion tranche of the current bailout plan.

Positions between Greece and its creditors are still far apart on pensions, VAT and labour market reform.

Documents leaked by Greek media on Thursday show for instance that creditors require cuts in pensions costs by up to 1% next year while Athens refuses that "vested pensions rights are affected".

With a new IMF deadline on 30 June, Greece can calculate on a deal before 15 June, when Eurozone deputy finance ministers will meet to prepare the 18 June Eurogroup meeting.

The Eurogroup would then agree to provide Greece with cash from the bailout loan.

This scenario was however questioned at a teleconference between Eurozone deputy ministers on Thursday.

"Concerns were expressed a third extension of the current programme could be needed," to keep funds available after the end of the programme on 30 June, an official quoted by Reuters said.

Default?

The Greek decision not to repay the IMF on Friday can also be interpreted as an implicite threat to default in case creditors do not compromise on Greek demands.

After Wednesday's meeting in Brussels, Tsipras said that "the only realistic proposal is our proposal".

And on Thursday, after the IMF move, he posted on Twitter a message saying that "the government [would] not accept extreme proposals. Our people have suffered enough during the past five years".

The tactical IMF move comes as Greece is putting forward demand on debt restructuration.

In the proposal sent to creditors and leaked by Kathimerini newspaper, the Greek government asks that its debt to the IMF is repaid in two phase, the first on 30 June and "another in accordance with a subsequence refinancing of the country's public debt".

It also considers repaying the European central banks using the money from Greek bonds owned by the ECB as well as refinancing on the market and a return to profit.

The delay in the IMF payment and the uncertainties over the Greek parliament's support for a deal also raises the prospect of an accidental Greek exit from the Eurozone.


Friday afternoon's debate in the Vouli, the Greek parliament, will be as important as talks between EU leaders to know if a deal can be struck soon.

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