Greece delays IMF payments to June 30 after bailout talks fail
Last-minute talks in Brussels fail to produce a deal acceptable to Greek leadership
Greece pulled the emergency cord Thursday in its fraught bailout talks, opting to bundle together its four payments due to the International Monetary Fund this month into one on June 30 — a course last followed three decades ago by Zambia.
It will not make the $418 million Cdn. payment due June 5, nor the next two payments, invoking a little-used option to defer them all to the end of the month.
The delay is allowed under IMF rules, but provides a stark sign of how Greece is struggling to make ends meet without the vital rescue loans that have been withheld since last summer, as Athens and its creditors fail to agree on economic reforms.
'Extreme proposals will not be accepted by the Greek government. Everyone must understand that the Greek people have suffered greatly over the last five years and some people must stop playing games at their expense'- Prime Minister Alexis Tsipras
The move follows the failure of radical left Prime Minister Alexis Tsipras to break the stalemate with creditors at a late-night meeting with European Commission head Jean Claude Juncker and the top official representing Greece's peers in the eurozone. The talks will resume "within coming days," officials said.
On his return to Athens, Tsipras told government officials that "extreme proposals will not be accepted by the Greek government. Everyone must understand that the Greek people have suffered greatly over the last five years and some people must stop playing games at their expense."
No more cash
Without a deal, Greece will not get the 7.2 billion euros ($10 billion Cdn) remaining from its 240 billion-euro ($337 billion) bailout fund, which it's been relying on for five years. Without the money, it will struggle to pay upcoming debts and the country could soon go bankrupt — a possible preamble to a forced exit from the euro and a return to a financial stone age with a devalued version of its old national currency.
"The Greek authorities have informed the Fund today that they plan to bundle the country's four June payments into one, which is now due on June 30," IMF spokesman Gerry Rice said. "The decision was intended to address the administrative difficulty of making multiple payments in a short period."
Under an IMF rule from the 1970s, countries can ask to bundle together multiple payments if they fall within a single calendar month. Not since Zambia in the mid-1980s has a country made the request, according to the IMF.
Still, the request buys some time for the Greek government, which has already scraped the barrel of its finances by forcing local authorities, hospitals and universities to lend it their cash reserves. Its first IMF payment of a little more than 300 million euros ($421 million) was due on Friday, part of a total 1.6 billion euros ($2.2 billion) due to the Fund this month.
Greece has bigger payments due to the European Central Bank this summer, and can't meet them without the rescue money. Inability to repay creditors or pay pensions and public sector salaries could cause havoc involving capital controls and an unprecedented departure from the 19-country eurozone.
For now, Thursday's IMF postponement does not appear to impact Greek banks' ability to draw on vital emergency credit from the Greek central bank, as permitted by the European Central Bank. An ECB spokesman declined to comment on the move.
At an emergency meeting with ministers Thursday, Tsipras called a parliamentary debate for Friday on the course of the bailout negotiations.
Syriza governs in a coalition with the right-wing Independent Greeks and holds a majority of 12 seats in the 300-member Greek parliament. Growing dissent in his party has fueled talk of another snap election in the heart of the summer, which Syriza would probably win, according to opinion polls. However, the uncertainty would likely heap further damage on the economy, which is back in recession after a brief bout of growth.
EU proposals unacceptable
The finance ministry said reforms and tax measures advocated by the three institutions providing Greece's rescue loans — the IMF, ECB and Commission — would "significantly deepen" poverty and unemployment.
"After four months of negotiations, the institutions have tabled proposals whose implementation, in the opinion of the finance ministry, lack the ability to solve the riddle of the financial crisis that the policies of the past five years have aggravated," a ministry statement said.
"The agreement that Greece — and Europe — needs demands an immediate shift by the institutions to more realistic proposals that will offer a prospect of recovery and social sensitivity."
The deadlock in Brussels disappointed investors across Europe, with the main Athens stock market unsurprisingly bearing the brunt of the selling, closing down 1.3 percent.
Tsipras noted progress had been made in the Brussels talks on the scale of the budget surplus that Athens has to meet —effectively the lower the surplus the country has to post the less draconian the budget measures have to be. But he said lingering disagreements over other key issues, such as proposed sales tax hikes and pension cuts, mean that an agreement is not ready.
"If the government accepted this proposal, it would have been a disorderly retreat and an agreement to our submission," Social Security Minister Dimitris Stratoulis told Parliament.
"The entire package of proposals that were submitted yesterday are rejectable by our government," he said, describing them as an attempt by bailout lenders to impose "neo-colonialism."
The government was elected in January on a promise to end the hated austerity that creditors have demanded in return for bailout cash over the past five years.
A series of tax hikes and spending cuts have succeeded in taming Greece's budget deficits but the cost of the prescribed medicine has been steep: average incomes have fallen by at least a third, unemployment has shot up to 28 percent with a million jobs lost, and the economy has shrunk by more than a quarter.