[Marxism] Greece and I.M.F. Hold Talks on a Crucial Debt Payment

[Louis Proyect]

NY Times, Apr. 5 2015
Greece and I.M.F. Hold Talks on a Crucial Debt Payment
By LANDON THOMAS Jr.

As a crucial date approaches for Greece to make a major debt payment, 
the markets are yet again weighing the possibility that the country 
could actually default on its loans.

Such an outcome — a decision by the Greek government not to pay its 
creditors — has generally been seen as remote, even since the left-wing 
Syriza government came to power in January.

But now, after months of bitter, inconclusive negotiations over the 
austerity measures Greece would have to impose to secure desperately 
needed cash from Europe, Greek government officials are grappling with 
very limited options for handling their cash squeeze.

On April 9, Greece must pay 458 million euros, about $503 million, to 
the International Monetary Fund, a date and sum that in recent weeks 
have come to loom large for investors, many of whom worry how the 
markets would absorb a messy Greek default.

In a statement, the I.M.F. said that Ms. Lagarde and Mr. Varoufakis were 
having an “informal discussion on the Greek government’s reform program.”

Greece has said on numerous occasions that it has the money to pay the 
I.M.F. this week. Moreover, Mr. Varoufakis, from the moment he became 
finance minister this year, has gone out of his way to cultivate ties 
with Ms. Lagarde and has said that paying the fund was a priority for 
Greece.

Over the last month, however, the economic situation in Greece has 
worsened greatly. Deposits worth about €25 billion have been withdrawn 
from Greek banks, some of which are now on life support with the 
European Central Bank.

The government’s tax collections are also suffering as companies and 
consumers fret over the prospect that Greece might be forced to abandon 
the euro.

Now, with Europe refusing to permit Greece access to temporary lines of 
liquidity — such as letting its banks issue more short-term treasury 
notes — Greece is running out of cash. Which means that if it were to 
pay the fund €458 million this Thursday, there might not be enough left 
in the coffers to pay pensions and public sector wages the next week, 
some Greek officials say.

Mr. Varoufakis, who came to power on a platform of ending the policy of 
putting the needs of Greece’s creditors above its suffering citizens, 
was to make the case to Ms. Lagarde that his government could not meet 
all of its commitments.

“This government has made strong statements that they will meet their 
commitments,” said a person who was involved in the negotiations but was 
not authorized to speak publicly. The problem is, this person said, 
Greek officials have made commitments to their own people as well. “They 
are being pushed to the wall.”

There is some wiggle room. Even if Greece does not pay up on Thursday, 
it will not be in technical default as there is a 30-day grace period 
that could allow the government to pay its pension and wage obligations 
and strike a broader deal so that its creditors could disburse the 
needed funds.

Mr. Varoufakis is also planning to meet with officials in the United 
States Treasury on Monday in the hope that the United States, as the 
dominant voice at the I.M.F., might pressure fund officials, and Europe 
as well, to cut Greece some slack.

The United States has been quietly critical of Europe’s harsh stance 
toward Greece, warning of the consequences that a Greek default and exit 
from the euro would have on financial markets.

Not paying the I.M.F. could set off defaults in the billions of euros 
that Greece owes its European lenders.

All told, Greece owes €320 billion, with close to €20 billion in 
payments coming due in the next six months.

Since the I.M.F. was founded in 1945, developed nations have made good 
on their debts. On the other hand, there have been numerous cases in 
which countries with troubled economies, like Argentina, have ended up 
in arrears.

“Of all the possible steps the Greeks could take to manage their 
immediate cash flow crunch, default on the I.M.F. would be the most 
serious,” said Peter Doyle, an independent economist who worked for many 
years in the fund’s European department. “It would be tantamount to a 
declaration of ‘war’ by the Greeks.”

Last week, Mr. Varoufakis sent a 26-page report to Greece’s creditors, 
laying out in considerable detail the measures the country planned to 
take to improve its financial situation.

While there were many conventional proposals dealing with labor reforms 
and improved tax collection, aimed at appeasing the country’s lenders, 
the policy menu included items like adding extra pension payments to 
low-income Greeks that are unlikely to please the country’s 
austerity-obsessed counterparts.

At the same time, Prime Minister Alexis Tsipras has scheduled a visit to 
Moscow to meet with President Vladimir V. Putin of Russia this week, 
increasing speculation that Greece is looking elsewhere for ways out of 
its cash squeeze. But with its own economy is in dire straits, Russia 
may not be in a position to rescue Greece financially.