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Greece to Put Off Friday Debt Payment to I.M.F. Greece to Put Off Friday Debt Payment to I.M.F.
(35 minutes later)
ATHENS — Greece told the International Monetary Fund on Thursday that it would not make a debt payment due this week, taking a little-used option to defer that payment and three others until the end of the month. ATHENS — Greece told the International Monetary Fund on Thursday that it would not make a $335 million payment due this week, invoking a little-used option to defer that payment and three others until the end of the month.
The move buys time for Greece, which is running out of money as it tries to negotiate a new debt deal with the I.M.F. and its European creditors. But given the tensions in those negotiations, Greece’s decision to withhold the payment, due Friday, carries political and financial-market implications that are hard to predict. The move buys time for Greece, which is running out of money as it tries to negotiate a new debt deal with the I.M.F. and its European creditors. But given the tensions in those negotiations, Greece’s decision to withhold the payment carries political and financial-market implications that are hard to predict.
Although the practice of bundling I.M.F. loan payments into a single sum during a calendar month is allowed under the fund’s rules, the last time that option was taken was by Zambia in the 1970s. Although the practice of bundling I.M.F. loan payments into a single sum during a calendar month is allowed under the fund’s rules, that option was last taken by Zambia in the 1970s.
“The decision was intended to address the administrative difficulty of making multiple payments in a short period,″ the I.M.F. said in a news release announcing the decision. Athens had no immediate comment. In a brief statement on Thursday, the I.M.F. said that Greece was invoking an option in the fund’s rules that is “intended to address the administrative difficulty of making multiple payments in a short period.” Athens had no immediate comment.
Simon Tilford, deputy director of the Center for European Reform in London, said the move reflected high-stakes brinkmanship by Athens. “What they’re saying to the creditors is, you’re going to have to blink, we’re not prepared to sign up to more of the same austerity and a continuation of what we’ve been going through for the last year,” he said. The decision apparently came as a surprise. Earlier in the day, Christine Lagarde, the managing director of the I.M.F., had said at a Washington news conference that she was confident that Greece would make Friday’s payment.
So far, Mr. Tilford added, the creditors had offered minimal concessions that most likely would not pass muster with the far left of Prime Minister Alexis Tsipras’s Syriza party. Greece is likely to accept only a deal that ends austerity and eliminates conditions that sharply reduce demand within the already moribund economy. A deal would also have to sharply reduce the requirement under the bailout for a primary surplus — the amount of cash in Greece’s coffers after expenses and debt payments. Mr. Tsipras has pushed for more of that money to be used to stimulate the economy. And yet, as tough talks with the country’s creditors stumbled and crawled, Greek officials had suggested all week that whether the I.M.F. would get the payment on Friday would depend on the prospects for an imminent deal to renegotiate the terms of its international bailout program.
Whether Greece would make the I.M.F. payment due this week — 300 million euros, or $335 million — had been a guessing game of late. Christine Lagarde, the managing director of the I.M.F., said earlier Thursday at a Washington news conference that she was confident that Greece would make the payment. The payment of $335 million, or 300 million euros, due Friday is part of a total of €1.6 billion that Greece owes the I.M.F. by the end of June.
But as tough talks with the country’s creditors stumble and crawl, Greek officials had suggested all week that the answer would depend on the prospects for an imminent deal to renegotiate the terms of its international bailout program. There had been signs this week — as recently as the early hours of Thursday — that Greece and its creditors were edging closer to an agreement. The Greek prime minister, Alexis Tsipras, had a five-hour meeting Wednesday night in Brussels to discuss a proposal on the table from the country’s creditors, and a counteroffer from Greece.
Asked about the payment late Wednesday in Brussels, Mr. Tsipras said, “Don’t worry about it,” prompting speculation that Athens would meet the Friday deadline. He met with Jean-Claude Juncker, the president of the European Commission, and Jeroen Dijsselbloem, president of the Eurogroup of finance ministers. They had discussed proposals to unlock €7.2 billion from Greece’s international bailout program. The parties reached no deal, but agreed that meetings and working groups would continue.
The comment was in reply to a reporter’s question as he left a five-hour dinner meeting with Jean-Claude Juncker, the president of the European Commission, and Jeroen Dijsselbloem, president of the Eurogroup of finance ministers. They had discussed proposals to unlock €7.2 billion from Greece’s international bailout program. The parties reached no deal, but agreed that meetings and working groups would continue. In a news conference after midnight, however, Mr. Tsipras indicated that there might be vast differences yet to bridge as the two sides seek economic compromises that would put Greece on a firmer financial footing. Mr. Tsipras ruled out one of the creditors’ demands — more pension cuts — noting that five years of austerity had led Greece to a “major catastrophe,” and that its economy had shrunk about 25 percent.
Meanwhile, Greek government officials keep playing it tough for the restive political crowd in Athens. It has become clear that whatever deal Mr. Tsipras and the creditors might hammer out, he could have a tough sell with his own leftist Syriza party.
After Wednesday night’s meeting, all sides pointed to progress in the discussions. But differences remain. Mr. Tsipras, at a news conference afterward, ruled out more pension cuts, noting that five years of austerity had led Greece to a “major catastrophe,” and that its economy had shrunk by a quarter.
“The proposal of the Greek government is the only realistic one on the table,” he said.“The proposal of the Greek government is the only realistic one on the table,” he said.
Hard-liners in the Syriza party have suggested in recent days that they may dissent if Mr. Tsipras strikes a deal that they consider a violation of the anti-austerity pledges that brought the party to power in January. The junior coalition partner, the right-wing Independent Greeks, has also said it would not back further austerity. Simon Tilford, deputy director of the Center for European Reform in London, said the move to defer the I.M.F. payment reflected high-stakes brinkmanship by Athens. “What they’re saying to the creditors is, you’re going to have to blink, we’re not prepared to sign up to more of the same austerity and a continuation of what we’ve been going through for the last year,” he said.
On Thursday, as details of both proposals began to leak out, Mr. Tsipras faced a political backlash from his own leftist Syriza party when he returned to Athens.
Syriza hard-liners have suggested in recent days that they may dissent if Mr. Tsipras strikes a deal that they consider a violation of the anti-austerity pledges that brought the party to power in January. The junior coalition partner, the right-wing Independent Greeks, has also said it would not back further austerity.
Details of Greece’s proposal that were leaked to the news media indicate some concessions, allowing for tax increases but lacking the bold overhauls to the Greek pension system and the labor sector that the country’s lenders had been seeking.Details of Greece’s proposal that were leaked to the news media indicate some concessions, allowing for tax increases but lacking the bold overhauls to the Greek pension system and the labor sector that the country’s lenders had been seeking.
By contrast, the plan put forward separately by its creditors is said to include calls for further cuts to spending on pensions, tax increases and other painful measures. The creditor plan, though, would apparently agree to lower annual targets for primary surpluses — the amount of revenue Greece is required to hold in its coffers after expenses have been paid and before servicing its debt. A lower primary surplus would free up more money for Athens to spend on stimulating the economy. The creditor plan, meanwhile, does apparently contain some compromises, agreeing to lower annual targets for primary surpluses — the amount of revenue Greece is required to hold in its coffers after expenses have been paid and before servicing its debt. A lower primary surplus would free up more money for Athens to spend on stimulating the economy.
But the creditors’ proposal is also said to include calls for further cuts to pension spending, tax increases and other painful measures.
Those details prompted angry reactions from several government officials in Athens on Thursday, underscoring the difficulty Mr. Tsipras will have in gaining parliamentary support for any deal that is reached.
In Parliament, the labor minister, Panos Skourletis, referred to an “undeclared war” that he said was being waged “by modern capitalism.”
Mr. Tspiras is scheduled to brief Parliament on Friday on the state of the negotiations.
Greece and its creditors have worked on dueling proposals all week after a meeting in Berlin on Monday that brought together Chancellor Angela Merkel of Germany; President François Hollande of France; Ms. Lagarde of the I.M.F.; and the European Central Bank president, Mario Draghi.
Also present at the meeting on Monday was Mr. Juncker, who as head of the European Commission — the executive arm of the European Union — is playing the role of broker for the negotiations between Greece and its creditors. It was in that role that he met with Mr. Tsipras in Brussels on Wednesday night.
And yet, in comments to Greek television on Thursday, Alexis Mitropoulos, the deputy speaker of Parliament and a prominent lawmaker of Syriza, accused Mr. Juncker — who is widely perceived as friendly to Greece — of “delivering the most vulgar, murderous and tough plan when everyone was looking toward the negotiations closing.”
On another television station, Thodoris Dritsas, the shipping minister, vowed on Thursday that Greece would not give in.
“If what our partners want is full surrender, they’re not going to get it,” he said. “If Europe goes crazy, then the people can decide,” he added, apparently referring to the possibility of holding new elections in the event of a deadlock.
Some analysts remain skeptical about the fate of any agreement that might finally be hammered out.
“On balance, the deal as it emerges in its current shape and form will be impossible for Tsipras to sell at home,” said a report by Teneo Intelligence, a London-based research group. Much will depend on whether the Greek prime minister can manage to secure further concessions, the report added.
Ms. Lagarde, the I.M.F. chief, had indicated at her news conference on Thursday that important members of the creditors’ camp were taking a softer approach to Greece as they seek a compromise that will enable the country to repay its debts without further damaging its economy.
She said she endorsed statements by Mr. Draghi, who said on Wednesday that any program for Greece should contain “social fairness.”
And Ms. Lagarde said that eurozone leaders with whom she met in Berlin on Monday had worked to draft a proposal for the Greek government that “clearly demonstrated significant flexibility” on issues like government spending and labor regulations and would “take into account the political and social situation” in Greece.
But back in Athens, Mr. Tsipras was continuing to take a hard line. The prime minister met with Yanis Varoufakis, the country’s finance minister, and Euclid Tsakalotos, the Greek official who is coordinating the debt negotiations.