Greece Urges Creditors to Compromise as IMF Payment Nears

Bloomberg

by Marcus Bensasson

4:41 PM EEST

May 23, 2015

Greece called on the country’s creditors to compromise on demands to break an impasse over the release of funds for its cash-strapped economy as a deadline neared for payments due next month to the International Monetary Fund.

A day after Prime Minister Alexis Tsipras said Greece can’t absorb any more austerity measures, Finance Minister Yanis Varoufakis said his government has met the euro area and IMF three-quarters of the way so it’s up to creditors to cover the remainder. Interior Minister Nikos Voutsis, who has no economic decision-making powers, went so far Sunday as to say Greece couldn’t and wouldn’t pay the IMF in June without a deal.

“Greece has made enormous strides reaching a deal, it is now up to the institutions to do their bit,” Varoufakis said Sunday on BBC’s Andrew Marr Show. “It is not in their interests as our creditors that the cow that produces the milk should be beaten into submission to the extent that the milk will not be enough for them to get their money back.”

German Chancellor Angela Merkel and French President Francois Hollande last week gave Tsipras until the end of May to reach an agreement on its aid program, including economic policy changes demanded by creditors.

The yield on Greek two-year bonds fell 78 basis points to 23.1 percent at 11:27 a.m. local time on Monday. Greek stocks opened lower as the general ASE index fell 2.3 percent.

As time runs short, the Greek government has to pay monthly salaries and pensions by May 29 and repay about 300 million euros ($329 million) to the IMF a week later.

Wiggle Room?

German Finance Minister Wolfgang Schaeuble, meanwhile, signaled there isn’t much wiggle room after Tsipras’s government committed to policy changes in return for aid in a Feb. 20 euro-area accord.

“That is the condition for completing the current program,” Schaeuble said in a Deutschlandfunk radio interview aired Sunday. “The problems are rooted in Greece. And now Greece does have to fulfill its commitments.”

Some members of Tsipras’s Syriza party advocate defaulting on loans rather than backing down from the anti-austerity policies that swept it to power in January even if that leads the country out of the euro.

Greece doesn’t have the money and won’t pay what it owes the IMF next month, the interior minister said in a Mega TV interview Sunday. Spiegel Online on April 1 cited Voutsis as saying Greece should delay an April 9 payment to the fund, which was made.

Greece’s Creditors

Tsipras sent a letter May 8 to Greece’s creditors saying the country wouldn’t be able to pay about 750 million euros due to the IMF on May 12 without financing. The Greek government only decided to pay the amount after confirming it could use SDR or special drawing rights account reserves.

“We’ve done remarkably well for an economy that doesn’t have access to the money markets to meet our obligations,” Varoufakis said. “At some point we will not be able to do it.”

Pensions, sales-tax rates and targets for a primary budget surplus are among the open issues remaining between Greece and its creditors, a Greek government official said last week. A main obstacle is that the IMF needs to be on board, he said.

Euro Exit?

Euro-area finance ministry officials, known as the Euro Working Group, will hold a teleconference call on Thursday to discuss Greece, two people familiar with the matter said, asking not to be named in line with policy. Earlier in the week, the ECB’s Governing Council will hold its weekly review of emergency liquidity support to the country’s lenders.

A Greek exit from the euro is just a matter of time and wouldn’t lead to the breakup of monetary union, former Federal Reserve Chairman Alan Greenspan told Het Financieele Dagblad in an interview published Saturday. An exit could make the euro stronger, billionaire investor Warren Buffett said in an interview in the Euro-am-Sonntag newspaper.

“Once you are in a monetary union, getting out of it is catastrophic,” Varoufakis said. “It would be a disaster for everyone involved. It would be a disaster primarily for the Greek social economy but it would also be the beginning of the end of the common currency project in Europe, whatever some analysts might be saying.”