Greece confirms repayment of €750m loan instalment to IMF

Ian Traynor in Brussels and Helena Smith Smith in Athens Tuesday 12 May 2015

Move aims to banish fears of insolvency in Athens but little optimism exists about a breakthrough in bailout talks any time soon

Fingers crossed. Dutch finance minister and Euro group chairman Jeroen Dijsselbloem listens to Greece’s finance chief Yanis Varoufakis (left) during the Eurozone finance ministers meeting in Brussels. Photograph: Francois Lenoir/Reuters

Greece moved to banish fears it was on the brink of insolvency and default on Monday, ordering the repayment of €750m (£535m) in IMF loans hours before they were due.

The payment – timed in a calculated gesture to coincide with the latest exercise in brinkmanship with Eurozone creditors in Brussels – came as a relief, though not as a surprise, to senior Eurozone officials.

Euro group finance ministers met their Greek counterpart, Yanis Varoufakis, in Brussels for the latest round in more than three months of talks, but there was no breakthrough and the session was relatively brief.

“More time is needed to bridge the remaining gaps,” said Jeroen Dijsselbloem, the Dutch finance minister and president of the Euro group.

Athens would make the €750m payment to the International Monetary Fund easily, said a senior Eurozone official. He also played down any substantive progress in the talks that aim to trade economic and fiscal reforms on the Greek side for the release of a final €7.2bn in bailout funds that Athens will need desperately to meet billions in payments to its EU creditors between now and August.

The left-wing government of Alexis Tsipras insisted on changing the terms of the bailout and so it had to deliver “detailed proposals and detailed calculations”, said Dijsselbloem. “A comprehensive and detailed list of reforms is needed for a successful conclusion … before any disbursement of funds.”

Dijsselbloem’s low-key remarks reflected the acute lack of progress being made in the Greek crisis, with little change since February when Tsipras and Greece’s creditors agreed to extend the bailout while awaiting his proposals.

Warning that the “liquidity issue” was urgent, Varoufakis said recent weeks had seen “considerable convergence, primarily due to our government’s great efforts and major concessions”.

But he added that responsibility for the crisis facing Greece had to be “moved to the shoulders of those who helped cause it”, who he said were currently unburdened.

Greek finance ministry officials confirmed that the general state accountancy office had been instructed to make the IMF transaction with immediate effect. Athens had not been expected to meet the debt obligation until Tuesday, had previously asked the fund for a delay, and had set rumours circulating on Sunday that it would stall on the payment.

With both sides locked in a pattern of contrasting narratives and spin, Athens and the Eurozone appeared to be talking past one another. There was no sign of the Europeans softening the conditions for disbursing the money and just as little evidence of Greece coming up with detailed plans that would satisfy its lenders.

The four-month extension of the bailout, agreed in February, expires at the end of next month, meaning that the negotiators need to strike a deal by the end of this month. Dijsselbloem indicated that there was no positive statement from the meeting that would signal to the European Central Bank it could lift the cap on Greek commercial bank lending to the government, money that is believed to be keeping the government afloat and enabling it to pay bills and salaries.

“We don’t manage the liquidity situation in Athens,” said Dijsselbloem.

The mood in Brussels was glum and resigned after months of flaring tempers and exasperation. Wolfgang Schäuble, the influential German finance minister who warned at the weekend that countries can “suddenly go insolvent”, conceded that Tsipras could stage a referendum on the bailout if he wanted. The last attempt to hold a popular vote on the issue in Greece, in 2012, horrified Eurozone leaders and brought down the government of George Papandreou.

Tsipras has warned that he might order a plebiscite if there is no deal with the Eurozone that he can stomach. All the polling evidence suggests the Greeks would vote to stay in the euro, meaning they would have to accept the Eurozone's terms. That mandate could allow Tsipras to bypass the anti-austerity hardliners in his governing Syriza movement without surrendering power.

“If the Greek government thinks it should have a referendum, then it should organise a referendum,” said Schäuble. “Maybe this would be the right measure to let the Greek people decide if it is ready to accept what is necessary, or if they want to have the other thing [Eurozone exit].”

While a pro-euro national vote could enable Tsipras to make concessions to the Eurozone without losing face, it would also be a big gamble. It would take time that Greece cannot afford, and risk chaos.

With talks at such a sensitive stage, analysts warned that a plebiscite would hold inherent dangers.

“Holding a referendum is in itself a challenge given that Greece will still have payment obligations while the referendum is being finalised,” said Jens Bastian, an Athens-based economics analyst. “European creditors and the IMF will be highly reluctant to make any financial commitments to Greece before the outcome of a referendum has become clear and binding.”

The talks are stuck over pension and labour market reform and privatisation, with the Tsipras government reluctant to lower the costs of the pensions system, cut the minimum wage or reform the collective bargaining system. It is also stalling on promises from the previous government on privatisation.

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