Thursday, May 7, 2015

Bankrupt Greeks make IMF payment as they blame Troika divisions for debt impasse

By Mehreen Khan 06 May 2015

Athens says 'serious disagreements and contradictions' among its creditor powers are holding back talks as it makes its latest IMF payment

Athens bemoans "red lines are everywhere" as country teeters on the brink

Greece’s embattled government has blamed a schism within its creditor powers for the three-month bail-out impasse which risks throwing the country out of the Eurozone.

In a government paper, Athens said “serious disagreements and contradictions” between the International Monetary Fund and its European partners were preventing the country coming to a long-awaited agreement to extend its bail-out programme

The paper suggested the IMF has refused to concede any ground to Athens on labour market reforms and pensions policy, while the European Commission was unwilling to provide any further relief on Greece’s €315bn debt mountain or relax its fiscal targets on the country.

The result, say the Greeks, are “red lines everywhere: pension reforms, labour reforms, and the primary surplus”.

“Under these circumstances there can be no compromise. The responsibility belongs exclusively to the institutions and their weakness of communicating with each other.”


Greece managed to scramble together the funds to make a €200m payment to the IMF on Wednesday morning, according to the Ministry of Finance. The government, which is having to draw on its dwindling domestic funds to stay afloat, faces another €770m repayment to the Fund on May 12. These international obligations are set to bleed the government’s coffers dry and push it to default on lenders, if no new bail-out money is released.

Having agreed in principle to extend its bail-out in February, Greece’s finance minister Yanis Varoufakis had previously hinted that divisions within the Brussels Group – formerly known as the Troika – would work to the country’s advantage.

But with the Leftist government becoming increasingly isolated in Europe, the government now said these unbridgeable differences were putting an “honourable compromise” further out of reach.

Europe's economics chief Pierre Moscovici hinted at the areas of disagreement, saying there would be no talk of debt relief for Greece until an agreement had been reached. Germany's Wolfgang Schaeuble also resisted any moves to write-off Greek debt after reports the IMF had been pressuring the Eurozone to alleviate the debt burden.

Bail-out uncertainty plunges Greek economy back into turmoil
Why it's time for debt-addled Greece to worry about the Finns
Greece's endgame: why they will finally be forced to capitulate

Athens has already resorted to raiding the cash funds of its universities, hospitals and local government bodies, to continue paying out public sector salaries and pensions. The government, which has already fallen into arrears to its suppliers, is also mulling plans to introduce a tax on cash withdrawals, in a desperate bid to prevent money leaving the financial system.

More than €28bn has fled Greek banks since November 2014, while tax revenues have collapsed since Syriza entered office in late-January.

In a bid to gain some leeway from its creditors, Mr Varoufakis met with Mr Moscovici in Brussels yesterday, after it was revealed the Greek economy was set to plunge further into crisis in 2015.

High unemployment, stubborn deflation and weak investment will see GDP grow by just 0.5pc in 2015, from an earlier projection of 2.5pc, according to the European Commission's Spring forecast.

Greece's debt mountain is also now expected to balloon to more than 180pc of GDP, compared to the initial projection of 170pc.

The other main player in Greece’s debt drama – the European Central Bank – is also due to have its say on events in Frankfurt on Wednesday. The ECB’s board will meet for its weekly review on providing emergency liquidity (ELA) for the country’s stricken banks.

Greek Deputy Prime Minister Yannis Dragasakis met with ECB president Mario Draghi in a bid to convince the Italian to loosen the squeeze on the country’s lenders. Mr Draghi hinted last month the ECB could further pressure negotiations by increasing the collateral requirements it demands from lenders to access ELA.

However, ECB sources suggested the Bank would not make any dramatic moves while negotiations were ongoing.

European Commission President Jean-Claude Juncker maintained on Monday that the single currency remained “irreversible.”

In comments that are likely to anger Britain, Mr Juncker added that a "Grexit" would expose the EU to huge risk, leaving the euro prey to Anglo-Saxon forces who "would do everything to try to decompose" what remained of the monetary union.

“Grexit is not an option," said the former Luxembourg president.

"If we were to accept, if Greece were to accept, if others were to accept that Greece could leave the area of solidarity and prosperity that is the Eurozone, we would put ourselves at risk because some, notably in the Anglo Saxon world, would try everything to deconstruct the euro area piece by piece, little by little."

Commission President Juncker has said Greece must do more to meet creditor demands

Bankrupt Greeks make IMF payment as they blame Troika divisions for debt impasse - Telegraph