Depending on whom you ask, Greece is either going to default next week or it isn’t. Athen’s debts are due at the end of the month and any hopes of an agreement between Greece and its creditors diminished on Thursday, after yet another emergency meeting of the Eurogroup.
French President Francois Hollande is hopeful that a deal can be reached in time, while German Chancellor Angela Merkel said negotiations are going nowhere. “We don’t yet have the necessary progress,” Merkel told reporters at the two-day summit of European Union leaders on Thursday. “One even has the impression that we’ve regressed a bit.”
The International Monetary Fund is of the opinion, however, that Greece can still repay an outstanding $1.7 billion by Tuesday. “Our expectation is that the payment will be made,” Gerry Rice, the fund’s chief spokesman, said Thursday in Washington.
IMF Policy
IMF policy has been to avoid extensions of outstanding payments and if the money is not in place by June 30th, Greece would be considered in arrears. Under normal conditions in a case like this, the IMF could call for a one-month delay in informing the lender of the non-payment. However, with Greece having already been granted several deferments, IMF Managing Director Christine Lagarde would feel obligated to notify the board immediately of Greece’s failure to come up with the money.
There are currently several other countries with overdue payments to the IMF including Sudan, Somalia and Zimbabwe and they are ineligible for further help from the IMF as long as they are in arrears. After two years of remaining in this situation, they can be expelled from the fund.
Will Greece face the same fate?
