Greece bought time in debt crisis negotiations with official creditors on Thursday when it moved to bundle four looming IMF loan payments into one, to be paid by the end of the month.
The rare move, permitted by the IMF only once before, allowed Athens to avoid a deadline yesterday to remit about 300 million euros (US$337.7 million) to the crisis lender, as it weighs the newest proposal from its IMF, European Commission and European Central Bank creditors.
Negotiations, which went into late hours on Wednesday, are aimed at unlocking the final tranche of the current bailout agreement, 7.2 billion euros. Athens desperately needs the funds to honor debt payments amid fears a default could lead to a messy Greek exit from the eurozone.
Photo: Reuters
For days the IMF had dismissed reports that Greece would invoke the “bundling” solution to the looming debt payment — essentially putting it off three weeks.
The announcement of it taking that option came just a few hours after IMF managing director Christine Lagarde said she was “confident” Greece would make the 300 million euro remittance yesterday.
“The Greek authorities have informed the [IMF] today that they plan to bundle the country’s four June payments into one, which is now due on June 30,” IMF spokesman Gerry Rice said, citing rules allowing debtor countries to regroup “multiple principal payments falling due in a calendar month.”
A Greek government source said “we used an option that IMF rules offer us, and which give us additional time for negotiating.”
Greek Prime Minister Alexis Tsipras took back to Athens the latest proposals from the “troika” of lenders after a four-hour meeting late on Wednesday with European Commission President Jean-Claude Juncker.
Eurogroup President Jeroen Dijsselbloem, who attended the talks over dinner in Brussels on Wednesday, told reporters it was a “very good meeting.”
Greece is seeking less harsh fiscal and reform requirements attached to the loans from the three official creditors, who in turn have expressed dissatisfaction with efforts by Tsipras’ government to roll back some earlier reform promises.
A Greek government source on Thursday laid out the key differences between the two sides, describing the troika’s position as “extreme” and “unacceptable.”
The debtors were insistent on higher primary budget surplus targets than Athens would like, financed by a higher sales tax, cuts to civil servants’ salaries and to national pensions, the source said.
Low targets for the primary surplus — the government budget surplus before counting in payments on the national debt — would free up more money for social spending, and the Greek government has been adamant there will be no further cuts to salaries and pensions.
“Primary surpluses play an important role in growth. [A target] 1 percentage point lower signifies a sum of 1.8 billion euros that could be dedicated to the economy and not just to service debt,” the source said.
German Chancellor Angela Merkel and French President Francois Hollande acknowledged “the necessity” to lower primary budget surplus targets during telephone talks on Wednesday with Tsipras, separate Greek sources said.
Athens has already made compromises on pension reform and sales tax.Differences over a property tax and debt restructuring were also key sticking points, with the sole note of agreement on social security reform, the Greek government source said.
Athens’ 240 billion euro bailout program is due to run out at the end of this month, and it and its creditors have been seeking a breakthrough in four-month negotiations.
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