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May 21, 2019
Cyprus Mail
Greece World

Greece threatens to skip IMF payment; Tsipras set for EU talks (Update 2)

Greek PM Alexis Tsipras will travel to Brussels today to meet with EC President Jean-Claude Juncker

By Karolina Tagaris and Deepa Babington

Greece threatened to miss a loan repayment to the IMF this week, opening the way for possible default, just hours before creditors were expected to present an ultimatum offering Athens funds in return for economic reform.

Prime Minister Alexis Tsipras visits Brussels later on Wednesday to see senior European officials, where he is expected to hear the terms of the plan drawn up this week at a meeting of top leaders, including German Chancellor Angela Merkel.

He called on creditors to show some “realism”, saying he wanted a deal that would let Greece escape from “economic asphyxiation” and put an end to “doomsday scenarios”, including his country being ejected from the single European currency.

With time running out, and looking to draw a line under months of acrimonious negotiations, Greece’s creditors have effectively come up with a take-it-or-leave-it offer.

Details of the proposal – and a rival one sent by Athens earlier this week – began to emerge on Wednesday. Greece’s offer called for a budget surplus before interest payments of 0.8 percent this year and 1.5 percent next year – close to the creditors’ proposal for 1 percent in 2015 and 2 percent in 2016, sources familiar with the proposals told Reuters.

The creditors see that surplus gradually rising to 3.5 percent in 2018, euro zone officials said. Athens offered to curb early retirements to save on pension payouts in line with previous proposals but it was not clear if it had offered any new concessions demanded by lenders on labour and pension reform.

The creditors’ willingness to lower the surplus target to levels below those set in Greece’s bailout programme represent a concession to Athens. But the proposal will almost certainly contain other elements that will be hard to accept for Tsipras and his leftist Syriza party, which was elected in January promising to end years of austerity for Greece.

Locked out of international bond markets, Greece has not received any cash from its main creditors – the International Monetary Fund, European Central Bank and eurozone countries – since last August and its coffers are all but empty.

It is due to pay back the IMF 300 million euros ($335 million) of loans on June 5, but the spokesman for Syriza’s lawmakers said on Wednesday it would miss this deadline if there was no prospect of an aid-for-reforms deal with its creditors.

“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 on Wednesday.

Greece has three other repayments, totalling some 1.23 billion euros, due to the IMF in June after the one on Friday.

Tsipras is due to meet European Commission President Jean-Claude Juncker and Eurogroup President Jeroen Dijsselbloem in Brussels, as well as representatives from the ECB and IMF.

“We do not expect any final outcome tonight. This is a first discussion, not a concluding one,” Commission spokesman Margaritis Schinas told a regular media briefing in Brussels.

The Greek prime minister, who has vowed not to inflict more economic hardship on his people and faces a backlash in his party if he is forced to retreat on this pledge, said he would push his government’s proposal at the Brussels meeting.

“Today, more than ever before, it is necessary that the institutions, and mainly the political leadership of Europe adopt the realism that the Greek side has been showing for the past three months,” he told Greek television.

“We need unity. We must avoid divisions and I’m certain, the political leadership of Europe, will do what it must, it will adopt realism.”

However, in an early sign of the resistance he is likely to meet, German Finance Minister Wolfgang Schaeuble said his first impression of the Greek proposal confirmed the view that the talks would not be over soon.


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.

Many euro zone capitals appear unwilling to offer Athens too much slack, fearing it would undermine fiscal rigour across the bloc and boost radicals in their own countries clamouring for an end to years of austerity triggered by the financial crisis.

If Greece skips the IMF payment, the immediate consequences are hard to predict. However, officials have warned for months that a default could ultimately push Greece out of the single European currency and unleash possible turmoil on world markets.

White House economic adviser, Jason Furman, said a Greek default was a “potential accident” in waiting.

“It would be a mistake to think it would be just contained to Greece,” he told a conference at the OECD think tank in Paris, saying policy-makers had already been caught wrong-footed in recent years by contagion from the sub-prime debt crisis.

Speaking at the same event, Spanish Economy Minister Luis de Guindos said a Greek exit from the euro was not on the table, while Portuguese Finance Minister Maria Luis Albuquerque said negotiations could be concluded “today, tomorrow, very shortly”.

The months of talks have stumbled on Greece’s insistence on reversing planned pension cuts, restoring collective bargaining rights and minimum wage levels. The two sides are also haggling over value-added-tax reforms, fiscal targets for this year and 2016 and the size of the civil service.

With cash running out and the economy seizing up as the government halts payments to suppliers and curtails investment, Tsipras faces intense pressure to capitulate soon to prevent an outright economic collapse.

His supporters have suggested that rather than go back on his campaign pledges, he might prefer to call a new election or a referendum to let the Greek people decide on the way forward.

Dutch Prime Minister Mark Rutte said an exit of Greece from the euro zone could still not be excluded and that bridging the gap between Athens and its creditors remained difficult.

“I do believe they are working very hard to get somewhere, but at the same time they (the Greeks) have made so many promises in the elections and afterwards in parliament … that it’s difficult to bridge the gap,” he told Reuters in Paris.

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