[Marxism] Greece and I.M.F. Hold Talks on a Crucial Debt Payment
lnp3 at panix.com
Sun Apr 5 19:23:38 MDT 2015
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
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 Deposits worth about €25 billion have been withdrawn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
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
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
“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
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.
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