Greece Raises Stakes in Showdown as Payment to IMF Deferred

by Nikos ChrysolorasVassilis KaramanisPaul Tugwell

June 5, 2015 — 9:53 AM EEST Updated on June 5, 2015 — 11:22 AM EEST

Bloomberg

Prime Minister Alexis Tsipras raised the stakes in Greece’s showdown with creditors, rejecting demands for more austerity to receive bailout funds and opting for an unconventional deferral of International Monetary Fund payments.

Tsipras told German Chancellor Angela Merkel and French President Francois Hollande during a call Thursday night that a list of demands needed to unlock bailout funds hammered out earlier this week by officials from the IMF and the euro area can’t be a basis for a deal, said a Greek official, who asked not to be identified discussing private talks.

Greece earlier Thursday notified the IMF that a 300 million euros ($337 million) payment due Friday would be deferred and bundled with three more payments at the end of the month. While bundling the transfers doesn’t constitute a breach of IMF rules, the deviation from standard practice adds to signs that Greece may be readying for a potential breakdown of talks after a four-month-long impasse.

“The delay in the payment to the IMF is an escalation of the confrontation,” said Nicholas Economides, an economics professor at New York University’s Stern School of Business. “It increases the risk of bankruptcy and a Grexit.”

Greek stocks and bonds opened lower on Friday, with the benchmark Athens Stock Exchange falling 3.1 percent as of 11:17 a.m. local time. Yields on two-year notes rose 176 basis points to 25.01 percent.

No Explanation

Only hours before the Greek request, IMF Managing Director Christine Lagarde had told reporters in Washington that a bundling of payments didn’t appear in the cards. When asked about the payment, the Greek premier had told reporters in Brussels on Wednesday, “don’t worry.”

No official statement was issued yesterday to confirm the bundling request by the Finance Ministry. Economy Minister George Stathakis on Friday told the BBC that the offer was “on the table more or less” to put off the payment to the end of the month.

The request wasn’t related to a lack of funds as Greece had enough cash reserves to meet the payment due Friday, said a person familiar with the country’s financing position. The official asked not to be named as he wasn’t authorized to discuss the matter publicly.

The euro dropped 0.68 percent against the dollar to a low of $1.1223 on the news of the bundling request. The common currency traded higher at $1.1269 as of 9:20 a.m. in London on Friday.

Parliament Address

Tsipras will address lawmakers at 6 p.m. local time in Athens Friday, after a week of frantic talks with European leaders failed to yield a breakthrough which would pave the way for the disbursement of emergency loans necessary to avert default.

Half of Greeks said the Syriza-led government should abandon its so-called red lines if creditors don’t accept them in order to have an agreement, according to a poll published Friday by the newsit.gr website. Almost the same number, 47 percent, said they disagree with the way the government is conducting negotiations. A strong majority, 74 percent, of those polled said they wanted Greece to remain in the euro. The poll was conducted on June 3 to June 4.

“The agreement and solution which both Greece and Europe so badly need requires the immediate convergence of institutions to more realistic proposals, which will advance economic growth and social sensitivity,” the Greek Finance Ministry said in a statement.