Greece Can’t Make €1.6B IMF Payment, Refuses to Budge on Rescue Aid Terms
ATHENS, Greece, May 24 (UPI) — The Greek government is on the verge of defaulting on its financial obligations to the International Monetary Fund, the nation’s interior minister said Sunday.
Desperate to avoid a spiraling bankruptcy, Athens is seeking a deal with creditors that would free up billions of euros in aid so the government can continue making loan repayments to the IMF — and still have sufficient monies to pay out critical expenses, like workers’ wages and pensions.
The cash-strapped government has been able to make prior payments, but Interior Minister Nikos Voutsis on Sunday made the most serious remarks yet that indicate Greece’s finances are in serious trouble — and that it doesn’t have the money to make the next IMF payment in June.
“The four installments for the IMF in June are €1.6 billion,” he said. “This money will not be given … It does not exist.”
Entirely shut out of the bond market and with no bailout funds available, Athens has been seeking an agreement with the European Union and the IMF to free up more than €7 billion in rescue aid that would help the Mediterranean nation avoid bankruptcy.
However, little progress has been achieved in that endeavor. Part of the problem is that the nation’s leftist Syriza party has refused to agree to labor and pension reforms mandated by lenders in order to secure the rescue aid. The EU and IMF say the reforms are necessary for Greece to achieve necessary growth and sustainability, and they won’t lend any more money without them.
Greek leaders, however, have resisted the requisites — saying the moves would likely hinder recovery rather than facilitate it — as the country endures one of its deepest recessions in decades.
“This policy of extreme austerity and unemployment in Greece must be hit,” Voutsis said. “We will not escape from this fight.”
Greece has been dogged by financial trouble and debt in recent years, but has always indicated that it would be able to make its IMF repayments. Sunday’s comments were the first from any official to indicate otherwise.
Greece is scheduled to make the next IMF payment between June 5-19. Athens made a payment of €460 million last month, but next month’s is more than three times that amount.
Some have speculated that Greece has been asking for financial assistance from Russia, including a reported promise of €5 billion for an oil pipeline. Prime Minister Alexis Tsipras also visited Russian President Vladimir Putin last month in a move that some viewed as a call for help.
Defaulting on its loan obligations would be disastrous for the Athens government and likely put its fiscal health into a coma, analysts believe. Heavy deposit withdrawals from banks and forced capital controls, they say, would almost assuredly sink the Greek economy.
Government leaders have reshuffled personnel in its ministry — including effectively sacking the reportedly stubborn Finance Minister, Yanis Varoufakis — with hopes it might accelerate a deal by giving power to officials who are more open to reforms. So far, it hasn’t worked.
Tsipras expressed some optimism Saturday, saying he believes the nation is nearing a solution, but pledged that Athens will not accept “humiliating” terms to secure aid.
Appointed to the Finance Ministry in January, Varoufakis said he, too, is optimistic a solution will be reached — pointing out that it would be catastrophic if Greece left the euro, and would mark “the beginning of the end of the common currency project.”
“We have met them three-quarters of the way, they need to meet us one-quarter of the way,” he told BBC News on Sunday.
Varoufakis said Greece has been able to make prior payments to the IMF by extracting 14 percent of its national output — a tactic he said was only a short term solution.
“At some point we will not be able to do it,” he said. “At some point we are going obviously to have to make this choice that no minister of finance should ever have to make.”