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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.
(about 4 hours later)
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. ATHENS — As it tries to negotiate a new bailout deal with creditors, Greece got some breathing room on Thursday by deferring a series of debt payments 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 carries political and financial-market implications that are hard to predict. But the move, in the face of growing restiveness in Athens, amplifies the pressure on Greece and its creditors to work out their differences.
Although the practice of bundling I.M.F. loan payments into a single sum during a calendar month is permitted under the fund’s rules, that option was last taken by Zambia in the 1970s. While some progress has been made in recent days, Greece continues to resist certain conditions, particularly on politically difficult issues like pension cuts. Thursday night, a Greek official said the government would not sign an agreement that did not include debt relief, something that has not been part of these negotiations.
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. Until they come to terms over economic changes and spending cuts, the creditors have refused to release €7.2 billion ($8.06 billion) from Greece’s international bailout program.
The decision apparently came as a surprise. Earlier in the day, Christine Lagarde, the managing director of the I.M.F., said at a Washington news conference that she was confident that Greece would make Friday’s payment. As talks with the country’s creditors have stumbled and crawled this week, the big uncertainty has centered on whether Greece will make a $335 million payment to the International Monetary Fund due on Friday. Greek officials had suggested that the payment would depend on the prospects for a deal.
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. On Thursday, Greece invoked a little-used option to put off that payment and three others, totaling €1.6 billion, until the end of June. 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 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. The announcement came as a surprise. Just three hours earlier, the fund’s managing director, Christine Lagarde, said she was “confident” that Greece would make its loan payment on Friday and dismissed talk that it would bundle its payments.
There were 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. In a brief statement on Thursday, the I.M.F. said the bundling option was “intended to address the administrative difficulty of making multiple payments in a short period.” Athens had no immediate comment on the decision.
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 they agreed that meetings and working groups would continue. The move by Athens is part pragmatism. By deferring the payments, Greece can continue to negotiate with its creditors and try to meet its financial needs at home even as it runs dangerously low on cash.
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. But it also allows Greece some degree of leverage, since the specter of default still hangs over the bailout talks. The creditors — the eurozone countries, the I.M.F. and the European Central Bank — are wary of the potential consequences.
“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,” said Simon Tilford, deputy director of the Center for European Reform in London.
Greece’s prime minister, Alexis Tsipras, spoke Thursday night via telephone with Chancellor Angela Merkel of Germany and President François Hollande of France, according to a Greek government official. The official said the conversation took place in a “good and constructive” climate. But Mr. Tsipras also told them the creditors’ proposal could not be the basis for a deal, since it did not take into account the common ground reached in technical-level talks in Brussels over the last few months, the official said.
Mr. Tsipras is set to brief the Greek Parliament on the state of the negotiations on Friday, ahead of debate involving opposition party leaders that is expected to be heated.
There had been signs this week that Greece and its creditors were edging closer to an agreement.
Greece and its creditors have worked on dueling proposals all week after a meeting in Berlin on Monday that brought together Ms. Merkel, Mr. Hollande, Ms. Lagarde and the president of the European Central Bank, Mario Draghi. Also present at the meeting on Monday was Jean-Claude 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.
On Wednesday night in Brussels, Mr. Tsipras had a five-hour meeting to discuss the dueling proposals with Jeroen Dijsselbloem, president of the Eurogroup of finance ministers. The parties reached no deal, but agreed that meetings and working groups would continue.
After initial indications of convergence, the tenor slowly started to shift.
In a news conference early Thursday, Mr. Tsipras indicated that there might be vast differences yet to bridge as the 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.
“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.
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. Greece’s proposal points to some concessions, like tax increases. But it lacked the bold overhauls to the Greek pension system and the labor sector that the country’s lenders had been seeking.
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. The creditors’ plan also contains some compromises, like 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 its economy.
But the proposal is also said to include calls for further cuts to pension spending, tax increases and other painful measures.
Those demands 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.
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.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. After details of the plan were leaked, the rhetoric in Athens got heated.
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 more money for Athens to spend on stimulating the economy. In In Parliament, the labor minister, Panos Skourletis, referred to an “undeclared war” that he said was being waged “by modern capitalism.” 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.”
But the creditors’ proposal is also said to include calls for further cuts to pension spending, tax increases and other painful measures. With the outcry, some analysts remain skeptical about whether any agreement might finally be reached.
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. “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 research group based in London. Much will depend on whether the Greek prime minister can manage to secure further concessions, the report added.
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 reached.
“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 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, 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 continued 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.