Crisis intensifies as Greece defers €300m IMF payment

Increasing signs of backlash facing Greek PM from his party over reform deal offered

Members of the public read newspaper reports about the growing Greek debt crisis in Athens. Photograph: Orestis Panagiotou/EPA

Members of the public read newspaper reports about the growing Greek debt crisis in Athens. Photograph: Orestis Panagiotou/EPA

 

The Greek crisis entered uncharted territory tonight after Athens deferred payment of €300 million due to the International Monetary Fund on Friday.

Greece is instead proposing to pay four instalments due to the fund this month in a single payment at the end of the month.

The IMF confirmed the Greek authorities had informed the institution that it planned to bundle the country’s June payments into one, which is due on June 30th.

The proposal to bundle the payments was confirmed just hours after IMF managing director Christine Lagarde said she expected Greece to meet the €300 million payment due tomorrow.

The deployment of a seldom-used but legal device may buy Greece time as it struggles to agree a new reform deal with lenders.

But it also indicates the country’s precarious financial position, more than four months after the Syriza-led government swept to power in January’s general election.

Greece was last month forced to tap its reserves at the IMF to meet a €750 million payment.

The last debtor country to bundle payments to the IMF was Zambia in the 1970s.

The €300 million payment is the first of four repayments totalling €1.6 billion due to the IMF this month.

Amid mounting signs of dissent within his party, Greek prime minister Alexis Tsipras is to address the Greek parliament tomorrow concerning the latest developments in the bailout negotiations, after talks with European Commission president Jean-Claude Juncker and the head of the eurogroup, Jeroen Dijsselbloem, ended without agreement in the early hours of Thursday in Brussels.

Mr Tsipras is expected to brief his cabinet tomorrow morning on the bailout discussions before addressing parliament at 6pm local time. A further meeting with Mr Juncker could take place on Saturday in Brussels.

In a sign of the resistance Mr Tsipras is likely to face from within his party on the new reform proposal, Greece’s economy minister, Euclid Tsakalotos, the chief negotiator with the creditors, said he was “shocked” by what he described as the ultimatum issued by Mr Juncker and Mr Dijsselbloem on Wednesday night.

Amid fears that Greece’s next hurdle could be a political crisis or general election as Mr Tsipras seeks to secure political support from the government, finance minister Yanis Varoufakis appeared to play down the need for an agreement in the next few days, telling Sky News that, “objectively speaking”, Greece has until June 30th to come up with a deal.

The finance minister declined to specify when the country may run out of cash.

Opposition leader Antonis Samaras urged Mr Tsipras not to call a general election and instead seek a national consensus on the reform plan. With both sides in the negotiations issuing counterproposals this week outlining suggested reform measures, a key area of contention remains pension changes.

Leaked copies of a five-page report presented by Mr Juncker to Mr Tsipras on Wednesday night show that Greece’s international lenders want it to impose further pension reforms equating to savings of 1 per cent of GDP.

This includes controversial proposals to cut a subsidy paid to poorer pensioners and raise the retirement age to 67. It also proposes the introduction of a 23 per cent standard VAT rate, eliminating various exemptions, and rules out any reversal of previously-implemented labour market changes.

The creditors’ proposal makes concessions in terms of Greece’s primary surplus target, however, proposing a primary surplus of 1 per cent this year, gradually rising to 3.5 per cent in 2018.