Greece was scheduled to pay the IMF around €300 million today. Athens will not make the payment.
On Thursday, the IMF acknowledged that Greece had indeed requested that its June payments to the Fund be bundled, buying PM Alexis Tsipras valuable time as he makes one final push to strike a deal with creditors that bears some vague resemblance to his party’s campaign promises. Whether or not he will be successful remains to be seen. It’s entirely possible that the PM’s defiant position on pension and VAT “red lines” is only possible due to the extra negotiating time afforded by the combined IMF payment option. The troika likely knows that if it can hold out for another few weeks, Tsipras will have no choice but to make painful concessions — the onus will then be on the PM to push the deal through parliament.
Speaking of parliament, Tsipras will address Greek lawmakers on Friday and as The New York Times notes, it is not likely to be a cordial affair:
[Creditors’] 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 party 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.
After details of the plan were leaked, the rhetoric in Athens got heated.
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.”
As noted previously, some manner of political shakeup is still more likely than not in Athens as Tsipras will ultimately be forced to accept a deal that party hardliners will not concede to. RBS has more on the political risks associated with the negotiations:
Elections now appear very likely. Either PM Tsipras will opt to force through measures demanded by creditors, likely triggering a collapse in parliamentary majority, or go to polls now.
The risk is that Syriza may seek people’s mandate to return to drachma.
See 60% probability that deal is accepted, with elections likely after implementation, and 40% chance that govt goes to polls before a deal is signed.
In latter scenario, forecast 50/50 probability that events ultimately trigger euro exit.
And here’s some further color on the Greek counterproposal from Eurogroup chairman Jeroen Dijsselbloem:
“Apparently [bundling is] an option IMF has offered earlier. That’s an example and that’s why this possibility is offered to Greece. If they come up with alternatives on our proposal, it should be financially correct and wise from an economic perspective. We’re waiting for their reaction. We were hoping to get it by today, but I still can’t tell. I’m not sure either whether this meeting will go on today. We’re in a process of coming up with a plan to get Greece back on track which makes them stronger from a financial and economic point of view. They’re far away from that and they’re threatening to get even further away from that. This cannot be achieved with just nice measures but it also requires unpleasant measures, that’s something the Greek government will have to recognize.”
Meanwhile, in Berlin, Angela Merkel continues to face pressure from her Christian Democratic bloc to abandon support for Greece and there are now rumors that German FinMin Wolfgang Schaeuble and the Chancellor may have had a falling out over the course of the week, with Schaeuble only learning of emergency talks by accident through IMF chief Christine Lagarde.
German Finance Minister Wolfgang Schaeuble wasn’t informed about a confidential meeting between Chancellor Angela Merkel, IMF Managing Director Christine Lagarde and ECB President Mario Draghi on June 1, Bild-Zeitung says.
Schaeuble learned of the meeting by chance through Lagarde Bild cites unnamed high-ranking Finance Ministry official as saying that Merkel acted unilaterally.
Bild says there’s concern among lawmakers in Merkel’s Christian Union bloc that Schaeuble would quit if Merkel undermines his tough stance on Greece
Schaeuble would not agree to a “rotten compromise” on Greece as that would endanger his credibility, Bild cites CSU lawmaker Hans Michelbach as saying.
Without Schaeuble, the Christian Union bloc wouldn’t back any aid for Greece, Bild cites Michelbach as saying.
The German finance ministry has denied the split.
Finally, in what is perhaps the most definitive sign that talks between Athens and creditors have reached an outright stalemate, Tsipras is once again playing the only card he has left: the 'Russian pivot.'
Greek PM Alexis Tsipras, Russian President Vladimir Putin to hold call at 1pm Athens time, a Greek govt official says in text message.
Tsipras, Putin to discuss Greek PM’s visit to Russia where he will attend St. Petersburg Economic Forum June 18-20: official
Leaders to discuss cooperation in business, energy: official
As a reminder, Greece has indicated it is prepared to sign an MOU regarding the construction of its portion of Gazprom's Turkish Stream pipeline, and previous reports suggest it's still possible that Athens can secure a loan from Moscow against expected future profits from the two countries' energy partnership.
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Ultimately, all eyes will be on Greek MPs as the market attempts to gauge how much leeway Tsipras has in terms of concessions he can make without throwing the country into political turmoil.