For days, Greek officials have been insistent that the country will make a €300 million payment to the IMF this Friday and thus avoid a default.
Last month, we heard the same rhetoric out of Athens and as it turns out, the government had prearranged an end-around whereby Greece tapped its IMF SDR reserves to stay current. In other words, the IMF paid itself. We suspected that some similar arrangement might be in the offing this month when economy minister George Stathakis said bundling June’s payments would not be necessary because Greece was looking at a “technical solution” to make the June 5 payment.
On Tuesday evening we noted [8] that some Greek officials seemed to be suggesting that the “technical solution [9]” was simply a veiled reference to securing a deal that would allow the country to use a portion of its aid disbursement to pay the Fund at the end of the week. That now appears to have been confirmed with a Syriza spokesman saying that if Tsipras does not ink a deal in the next 48 hours, Greece will miss Friday’s payment.
Via Reuters:
Greece will not make a June 5 repayment to the International Monetary Fund if there is no prospect of an aid-for-reforms deal with its international creditors soon, the spokesman for the ruling Syriza party's lawmakers said on Wednesday.
The payment of 300 million euros ($335 million) is the first of four this month totaling 1.6 billion euros from a country that depends on foreign aid to stay afloat.
Greece owes a total of about 320 billion euros, of which about 65 percent to euro zone governments and the IMF, and about 8.7 percent to the European Central Bank.
On Tuesday, Greece's creditors drafted the broad outlines of an agreement to put to the leftist government in Athens in a bid to conclude four months of negotiations and release aid before the country runs out of money.
"If there is no prospect of a deal by Friday or Monday, I don't know by when exactly, we will not pay," Nikos Filis told Mega TV.
At this juncture there's no hope of an actual payment on Friday. Discussions between Tsipras and creditors will likely stretch into the weekend and even if an agreement were struck yesterday, passing the terms through parliament is bound to be an arduous process. Bundling the payments or arrears pending a government shakeout seems to be the most likely scenario. As for an actual default, as mentioned previously, that is to a certain extent a judgement call by the IMF and can ultimately be delayed for at least 30 days at the Fund's discretion.
Speaking of deal “prospects”, PM Alexis Tsipras will meet with European Commission President Jean-Claude Juncker to discuss Greece’s proposal which Tsipras submitted on Monday evening. Tsipras says Greece “had no feedback on its proposal”, confirming what we said yesterday: creditors seemingly did not care about the Greek draft because Hollande, Merkel, Draghi, and Junker apparently agreed on Monday that the troika would simply pen a final proposal for Tsipras and let him know where he needed to sign.
As for the troika’s draft agreement, Dutch PM Mark Rutte confirms what we already knew: the issues are pension reform, fiscal belt-tightening, and VAT.
Via Bloomberg:
“The discussion we’re focusing on is reforms in pensions, labor market and fiscal consolidation and
these seem to be the three, next to the value-added tax discussions, three or four of the main topics,” Dutch Prime Minister Mark Rutte says in an interview with Bloomberg Television.
“The new government can take out certain measures and put in place other proposals as long as when you add them up, the results are still the same in terms of the macro- economic numbers and the fiscal impact as in the previous agreement”
For all the optimists out there, we'll leave you with the following from Spanish FinMin Luis de Guindos:
“[You] can check in [to the euro] but not check out. [I’m] totally sure [Greece will get deal].”
