 "Greece and IMF hold talks on crucial debt payment")
As a crucial date approaches for Greece to make a major debt payment, the markets are yet again weighing the possibility that the country could actually default on its loans.
Such an outcome - a decision by the Greek government not to pay its creditors - has generally been seen as remote, even since the left-wing Syriza government came to power in January.
But now, after months of bitter, inconclusive negotiations over the austerity measures Greece would have to impose to secure desperately needed cash from Europe, Greek government officials are grappling with very limited options for handling their cash squeeze.
On April 9, Greece must pay euro 458 million, about $503 million, to the International Monetary Fund, a date and sum that in recent weeks have come to loom large for investors, many of whom worry how the markets would absorb a messy Greek default.
Adding to these concerns was the abrupt decision by Greece's finance minister, Yanis Varoufakis, to fly to Washington and meet with the IMF's managing director, Christine Lagarde, on Sunday.
Following the meeting Lagarde said she welcomed "confirmation by the minister that payment owing to the fund would be forthcoming on April 9th." Varoufakis said that Greece would meet all its obligations, although neither party provided details in terms of how Greece would secure the funds to make this happen.
Greece has said on numerous occasions that it has the money to pay the IMF this week. Moreover, Varoufakis, from the moment he became finance minister this year, has gone out of his way to cultivate ties with Lagarde and has said that paying the fund was a priority for Greece.
Over the last month, however, the economic situation in Greece has worsened greatly. Deposits worth about €25 billion have been withdrawn from Greek banks, some of which are now on life support with the European Central Bank.
The government's tax collections are also suffering as companies and consumers fret over the prospect that Greece might be forced to abandon the euro.
Now, with Europe refusing to permit Greece access to temporary lines of liquidity - such as letting its banks issue more short-term treasury notes - Greece is running out of cash. Which means that if it were to pay the fund €458 million this Thursday, there might not be enough left to pay pensions and public sector wages the next week, some Greek officials say.
Varoufakis, who came to power on a platform of ending the policy of putting the needs of Greece's creditors above its suffering citizens, was to make the case to Lagarde that his government could not meet all of its commitments.
"This government has made strong statements that they will meet their commitments," said a person involved in the negotiations but not authorised to speak publicly. The problem is, this person said, Greek officials have made commitments to their own people as well. "They are being pushed to the wall."
There is some wiggle room. Even if Greece does not pay up on Thursday, it will not be in technical default as there is a 30-day grace period that could allow the government to pay its pension and wage obligations and strike a broader deal so that its creditors could disburse the needed funds.
Varoufakis is also planning to meet with officials in the United States Treasury on Monday in the hope that the United States, as the dominant voice at the IMF, might pressure fund officials, and Europe as well, to cut Greece some slack.
The United States has been quietly critical of Europe's harsh stance toward Greece, warning of the consequences that a Greek default and exit from the euro would have on financial markets.
Not paying the IMF could set off defaults in the billions of euros that Greece owes its European lenders.
All told, Greece owes €320 billion, with close to €20 billion in payments coming due in the next six months.
Since the IMF was founded in 1945, developed nations have made good on their debts. But there have been numerous cases in which countries with troubled economies, like Argentina, have ended up in arrears.
"Of all the possible steps the Greeks could take to manage their immediate cash flow crunch, default on the IMF would be the most serious," said Peter Doyle, an independent economist who worked for many years in the fund's European department. "It would be tantamount to a declaration of 'war' by the Greeks."
Last week, Varoufakis sent a 26-page report to Greece's creditors, laying out in considerable detail the measures the country planned to take to improve its financial situation.
While there were many conventional proposals dealing with labour reforms and improved tax collection, aimed at appeasing the country's lenders, the policy menu included items like adding extra pension payments to low-income Greeks that are unlikely to please the country's austerity-obsessed counterparts.
At the same time, Prime Minister Alexis Tsipras has scheduled a visit to Moscow to meet with President Vladimir V Putin of Russia this week, increasing speculation that Greece is looking elsewhere for ways out of its cash squeeze. But with its own economy is in dire straits, Russia may not be in a position to rescue Greece financially.
©2015 The New York Times News Service
Such an outcome - a decision by the Greek government not to pay its creditors - has generally been seen as remote, even since the left-wing Syriza government came to power in January.
But now, after months of bitter, inconclusive negotiations over the austerity measures Greece would have to impose to secure desperately needed cash from Europe, Greek government officials are grappling with very limited options for handling their cash squeeze.
On April 9, Greece must pay euro 458 million, about $503 million, to the International Monetary Fund, a date and sum that in recent weeks have come to loom large for investors, many of whom worry how the markets would absorb a messy Greek default.
Adding to these concerns was the abrupt decision by Greece's finance minister, Yanis Varoufakis, to fly to Washington and meet with the IMF's managing director, Christine Lagarde, on Sunday.
Following the meeting Lagarde said she welcomed "confirmation by the minister that payment owing to the fund would be forthcoming on April 9th." Varoufakis said that Greece would meet all its obligations, although neither party provided details in terms of how Greece would secure the funds to make this happen.
Greece has said on numerous occasions that it has the money to pay the IMF this week. Moreover, Varoufakis, from the moment he became finance minister this year, has gone out of his way to cultivate ties with Lagarde and has said that paying the fund was a priority for Greece.
Over the last month, however, the economic situation in Greece has worsened greatly. Deposits worth about €25 billion have been withdrawn from Greek banks, some of which are now on life support with the European Central Bank.
The government's tax collections are also suffering as companies and consumers fret over the prospect that Greece might be forced to abandon the euro.
Now, with Europe refusing to permit Greece access to temporary lines of liquidity - such as letting its banks issue more short-term treasury notes - Greece is running out of cash. Which means that if it were to pay the fund €458 million this Thursday, there might not be enough left to pay pensions and public sector wages the next week, some Greek officials say.
Varoufakis, who came to power on a platform of ending the policy of putting the needs of Greece's creditors above its suffering citizens, was to make the case to Lagarde that his government could not meet all of its commitments.
"This government has made strong statements that they will meet their commitments," said a person involved in the negotiations but not authorised to speak publicly. The problem is, this person said, Greek officials have made commitments to their own people as well. "They are being pushed to the wall."
There is some wiggle room. Even if Greece does not pay up on Thursday, it will not be in technical default as there is a 30-day grace period that could allow the government to pay its pension and wage obligations and strike a broader deal so that its creditors could disburse the needed funds.
Varoufakis is also planning to meet with officials in the United States Treasury on Monday in the hope that the United States, as the dominant voice at the IMF, might pressure fund officials, and Europe as well, to cut Greece some slack.
The United States has been quietly critical of Europe's harsh stance toward Greece, warning of the consequences that a Greek default and exit from the euro would have on financial markets.
Not paying the IMF could set off defaults in the billions of euros that Greece owes its European lenders.
All told, Greece owes €320 billion, with close to €20 billion in payments coming due in the next six months.
Since the IMF was founded in 1945, developed nations have made good on their debts. But there have been numerous cases in which countries with troubled economies, like Argentina, have ended up in arrears.
"Of all the possible steps the Greeks could take to manage their immediate cash flow crunch, default on the IMF would be the most serious," said Peter Doyle, an independent economist who worked for many years in the fund's European department. "It would be tantamount to a declaration of 'war' by the Greeks."
Last week, Varoufakis sent a 26-page report to Greece's creditors, laying out in considerable detail the measures the country planned to take to improve its financial situation.
While there were many conventional proposals dealing with labour reforms and improved tax collection, aimed at appeasing the country's lenders, the policy menu included items like adding extra pension payments to low-income Greeks that are unlikely to please the country's austerity-obsessed counterparts.
At the same time, Prime Minister Alexis Tsipras has scheduled a visit to Moscow to meet with President Vladimir V Putin of Russia this week, increasing speculation that Greece is looking elsewhere for ways out of its cash squeeze. But with its own economy is in dire straits, Russia may not be in a position to rescue Greece financially.
©2015 The New York Times News Service