Greece Moves to Pay Debt, but European Finance Ministers Unsatisfied

By LIZ ALDERMAN and JAMES KANTERMAY 11, 2015

New York Times

BRUSSELS — The government of Greece, quickly running out of cash, moved on Monday to quell fears of an imminent default on its debts, authorizing its treasury to make a big loan payment to the International Monetary Fund.

While Athens once again managed to pull together enough cash to avoid a default, it is not clear how much longer Greece can continue to scrape by.

Unless creditors agree to more aid, Greece will have trouble making a series of looming debt payments. The continuing standoff over the aid — and the uncertainty it has created — has darkened the outlook for the country’s economy, which risks another downturn.

Despite word of payment, Greece and its creditors on Monday remained at an impasse over a deal to free up fresh financial aid for the embattled country. Before releasing the aid, Greece’s creditors have been demanding that the government make economic overhauls in areas like pensions, labor rules and taxation.

Eurozone finance ministers, who were joined by representatives of the I.M.F. and the European Central Bank, indicated that Greece had made some progress on a proposed list of economic overhauls since an acrimonious meeting two weeks ago in Riga, Latvia.

But the finance ministers, known as the Eurogroup, said that Athens would need to do more work before it could hope to receive any further loan aid under the country’s current bailout program.

“We acknowledged that more time and effort are needed to bridge the gaps on the remaining open issues,” the Eurogroup said in a statement. The group added that officials would “decide on the possible disbursements” of money to Greece once an agreement had been reached.

The clocking is ticking for Greece.

The authorized payment to the I.M.F., which is due on Tuesday, is 757 million euros, about $848 million. By mid-July, Greece must pay the I.M.F. nearly €3 billion more and roll over €11 billion of short-term debt. From July through August, Athens must also pay the European Central Bank about €6.7 billion on its Greek bond holdings.

Prime Minister Alexis Tsipras has been scrambling to come up with ways to continue meeting Greece’s obligations. Despite a deal on Feb. 20 to extend Greece’s €240 billion bailout program by four months, creditors will not release the €7.2 billion aid tranche until Greece submits sufficient reforms.

In recent meetings with other lenders, I.M.F. officials have highlighted that Greece has been backtracking on earlier pledges to make its labor market more flexible and reduce the costs of its pension system, according to people with direct knowledge of the matter who spoke on condition of anonymity. Without the overhauls, the fund officials warned that Greece would find it more difficult to pay off its debts in the longer term and make it more likely that creditors would take losses.

The Greek government has been pulling together money anywhere it can be found. Last month, the government angered mayors across the nation by passing a decree obliging state entities to hand over their spare cash. The move raised some money, but it was unclear whether it was anywhere near enough to cover looming repayments.

Even if Greece does survive the summer without defaulting, the budgetary strains and required cuts add to the country’s staggering debt load, while doing little to revive its economy or ease its towering unemployment rate in the short term. And many economists are concluding that Greece will need a new set of bailout loans to avoid a financial collapse.

Foreign investments and business activity in the country have also started to decline again, in the face of renewed uncertainty over whether Greece might default or leave the eurozone altogether. Citing such uncertainty, the European Commission this month sharply cut its 2015 growth estimate for Greece, to 0.5 percent. Last fall, it forecast the economy would increase by 2.5 percent.

An agreement between Athens and its lenders would need to be reached by the beginning of June because otherwise “it starts getting very, very, very tight,” a eurozone official said, speaking on the condition of anonymity.

In a news conference after Monday’s meeting, Yanis Varoufakis, Greece’s finance minister, said Athens had made “great efforts and major concessions” to reach a deal.

While a breakthrough had not been reached, he said, prospects were improving. “The quest for an agreement that resolves the five- to six-year-old crisis of the Greek social economy is continuing,” he said. “Agreement is getting closer, and the institutions, our partners and representatives of the Greek government are continuing to search for that solution in very good spirits.”

The atmosphere was more cordial than that seen at a meeting between Greece and its creditors in Riga last month. There, Mr. Varoufakis was rebuked by other eurozone ministers, weary of his confrontational negotiating style. Mr. Varoufakis responded defiantly on his Twitter account the next day, quoting President Franklin Delano Roosevelt: “They are unanimous in their hate for me; and I welcome their hatred.”

Soon after, Mr. Tsipras downgraded Mr. Varoufakis’s prominence in negotiations with international lenders, putting other Greek officials in charge of the day-to-day discussions.

Pierre Moscovici, the European Union’s economic and monetary affairs commissioner, said Monday that compared with the discussions held in Riga, “there has clearly been progress.” Still, he said, Greece had not gone far enough on “substantial points.”

The European Commission vice president, Valdis Dombrovskis, was more blunt. “We still don’t have a comprehensive reform plan,” he said. “It’s clear that time is limited and we need to hurry up.”

Jeroen Dijsselbloem, the finance minister at the head of the Eurogroup, tried to be upbeat before Monday’s meeting, telling reporters that there would be “no result on the table today.” Mr. Dijsselbloem said that “in political terms, the deadline is the end of June” to reach a deal with Greece. “The Eurogroup stands ready as soon as there is a positive outcome from that process” in order to “take political decisions,” he said.

As the debt crisis continues with no resolution in sight, Mr. Tsipras has faced growing criticism of his government coalition. Last month, he said he might resort to calling a public referendum on any deal with the country’s international creditors if the package went beyond the no-austerity political mandate that brought his leftist government into power.

On Monday, Finance Minister Wolfgang Schäuble of Germany suggested that a referendum might not be a bad idea.

“It’s in the hands of the Greeks,” Mr. Schäuble told reporters. “If the Greek government feels it should hold a referendum, then it should hold a referendum. That may even be a right measure, to ask the Greek people to decide whether they are ready to accept what is necessary, or whether they want the alternative.”

Peter Eavis contributed reporting from New York and Niki Kitsantonis from Athens.