The IMF will not allow Greece to delay the 1 billion euro payment due next month on its debt.
The head of the IMF, Christine Lagarde , said delaying the payments would be an unprecedented action that would only make the situation worse.
Speaking at the organisation’s spring meeting, she said: “Payment delays have not been granted by the board of the IMF in the last 30 years.”
Her intervention is likely to heighten fears that senior policymakers in the US and Europe are preparing for Greece to leave the eurozone.
Getting the funds in time is going to be difficult for Greece and will likely lead to inability to meet pension and welfare payments this month.
Greece's finance minister will be meeting with the other eurozone ministers next week to discuss a new package of reforms that would allow Greece to pay lower interest rates and delay the much of its repayments beyond 2030, but the meeting is not expected to result in a decision.
If Greece was unable to pay the IMF and is forced to default on payments to public sector staff, pensioners and welfare recipients, economists have speculated it may be forced to introduce capital controls to prevent a flight of funds out of the country.
There is increasing speculation that unless Athens puts together a detailed reform agenda, the country will be allowed to leave the euro and bring back the drachma.
Olivier Blanchard, the IMF’s chief economist, appeared to pave the way for an exit when he said earlier this week that the eurozone without Greece was possible, saying that for the rest of the 19-member currency bloc it “would not be smooth sailing, but it could probably be done”.
Greece's situation isn't looking too good with compromise not likely. To have any hope of meeting payments, Greece needs more leniency from its creditors, but with little progress on the country's economic position, creditors are tentative to give Greece more chances.
Was the IMF's decision to not delay payments the right one? Is it fair that Greece's welfare recipients and retirees will bear the burden? Is default inevitable?
I do not have much faith in Greece coming up with the 1 billion euro by next month. From reading this article, I think Shelby's wounded deer analogy was spot on. Because Greece has shown no improvement, I believe the IMF was right to take a stand and not allow anymore delayed payments. It seems likely we will witness a Grexit...
ReplyDeleteI think that the IMF and the ECB are trying to push the wounded deer out of the forest.
ReplyDeleteI think that at this point, the IMF and ECB are tired of dealing with Greece. They are tired of pushing repayment down the road and are content with getting the repercussions over with now rather than later at this point. I think in the end it is fair that this is happening but not necessarily for the people of Greece.
ReplyDeleteShelby's comment about the wounded animal was about as accurate as it gets. It seeming more and more as though the Eurozone countries don't want to give Greece anymore money, and Greece doesn't really seem to be doing too much to revive their economy...that being said, I think default is inevitable and Greece will eventually get the boot from the Eurozone.
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