IMF dismisses hope of grace period on Greek loans
LUXEMBOURG/ATHENS – The IMF dashed any hope on Thursday that Greece could avert default if it fails to repay a 1.6 billion loan by the end of June, piling pressure on leftist Prime Minister Alexis Tsipras, who showed no sign of yielding to creditors’ demands.
Euro zone finance ministers descended on Luxembourg for a meeting once billed as the final chance to reach a deal, but any expectation of a breakthrough there had all but vanished with Athens ruling it out as a forum to discuss new proposals.
Ireland’s finance minister said he expected any chance of a last-ditch deal to avert a Greek default to hinge on a European Union leaders’ summit late next week.
As the impasse deepened, deposit withdrawals from Greek banks accelerated again this week, with 3 billion euros being pulled out between Monday and Wednesday, banking sources said. And Athens reported a steep 24 percent fall in tax revenue in May, even though the central government posted a primary surplus before debt service in the first five months of this year.
IMF boss Christine Lagarde closed one of Greece’s last potential escape hatches, declaring that the global lender would consider Athens in default if it misses the June payment, despite some reports that there might be some leeway.
“It will be in default, it will be in arrears vis-a-vis the IMF on July 1, but I hope it is not the case, I really do,” Lagarde told reporters in Luxembourg. “There is no grace period or two-month delay, as I have seen here and there,” she said.
German Chancellor Angela Merkel said a deal was still possible to provide Greece with additional funds, if Athens showed the necessary will. French Finance Minister Michel Sapin also spoke optimistically at the Luxembourg talks.
But Tsipras – making a symbolic visit to Russia at a time of sour relations between Moscow and the EU – insisted creditor demands for pension cuts would worsen the economic crisis.
In a guest column for Der Tagesspiegel newspaper in Berlin, he sought to dispel what he called a “myth” that German taxpayers were paying Greek pensions and wages.
“The blind insistence of cuts (in pensions) in a country with a 25 percent unemployment rate and where half of all the young people are unemployed will only cause a further worsening of the already dramatic social situation,” he said.
If Greece defaults on its debts, it could require capital controls that would potentially turf it out of the euro zone or the EU itself, becoming the first country ever to exit the bloc.
Greece confirmed on Wednesday that the government does not have the money to repay the IMF loan, which is the first in a series of debt repayments over the summer.
For its part, Russia quashed speculation that President Vladimir Putin – already at loggerheads with the West over Ukraine – would ride to Greece’s rescue. A deputy finance minister told Reuters there had been no request for money from Greece, and Russia had no resources for such a bailout.
NO GIGANTIC DIFFERENCES?
Ahead of the Luxembourg meeting, France’s Sapin told reporters there was “real scope for convergence”.
“I want to dispel this idea that there are gigantic differences between the sides … The differences can be overcome,” he said.
But the head of the Eurogroup of finance ministers of the currency area made clear he saw little prospect of a fast deal.
“I don’t have a lot of hope,” Jeroen Dijsselbloem said, when asked if a deal could be reached at the meeting. “I have only one job to do today and it is to see whether we can bring that deal with Greece closer,” he said.
“It requires further steps from the Greek side because we need a solid deal. It needs to hold up, also in the coming years, and it needs to be credible for Greece and the euro zone. I am not sure whether we will make any progress.”
With European leaders and Greece’s central bank warning a possible “Grexit” was on the horizon, European shares fell and Greek shares .ATG hit a new three-year-low.
In a sign of growing nervousness among many Greeks about their country’s fate, pro-euro demonstrators planned a rally in central Athens, calling for an end to the deadlock. The previous day, anti-austerity protesters rallied in support of the government and against policies set by lenders.
“I’m still convinced: where there’s a will, there’s a way,” Merkel told German lawmakers, repeating a message from last week. “If those in charge in Greece can muster the will, an agreement … is still possible.”
Merkel faces growing opposition from within her ruling conservatives to granting Greece any more bailout money, with a narrow majority of Germans now in favour of Greece leaving the euro zone.
Having been voted into power in January on a pledge to roll back austerity, Tsipras’s government has balked at demands for new pension cuts and tax hikes on basic goods like food and electricity. The IMF had dramatically quit the debt talks last week, citing major differences with Athens.
Greeks have been squeezed by five years of budget cuts demanded by the European Commission, the International Monetary Fund and the European Central Bank in two bailouts. But opinion polls suggest the majority want to stay in the euro.
“Greece belongs to Europe!” read one Facebook invitation to join Thursday’s pro-euro rally, which had received more than 12,600 “likes” by Thursday afternoon.
“We are sending a strong message to the government,” it said. “It’s time we join our voices in favour of our country staying in the euro and in the European family.”
Those calls were echoed in an open letter by a group of Greek businesses – including tourism operators and retailers – to Tsipras, urging him to close a deal.
“Greece’s relations with our partners have been hit hard and both sides are responsible for that,” the letter said. “But the most important thing is to not sacrifice a great national achievement which is Greece’s euro zone membership….” –Reuters