IMF playing hardball on Greece

May 5, 2015

A man holding a Greek national flag and a placard walks in Constitution Square in Athens

We’ve heard various dates for when Greece will run out of money and some have already passed without incident but it is clear Athens’ cash position is getting increasingly desperate and it hasn’t yet managed to win over its creditors with economic reform plans.

Government spokesman Gabriel Sakellaridis said on Monday that it intended to meet all its payment obligations but would need fresh funds before the end of the month.

A 200 million euros repayment to the IMF falls due on Wednesday and should be manageable but a second, 750 million euros bill to the Fund must be paid next week and that looks a tougher ask.

Intensive talks on an interim deal between a reshuffled Greek negotiating team and representatives of the European Commission, the European Central Bank and the IMF have been under way since last Thursday. Concessions have been offered by Athens but not yet enough to satisfy its creditors.

Labour Minister Panos Skourletis said the International Monetary Fund was taking the hardest line on demands for pensions cuts, rules to ease mass layoffs of private sector workers and opposition to a government plan to raise the minimum wage, all of which it requires in order to unlock remaining bailout funds.

The Greek government says that would condemn its people to further pointless hardship and that only by allowing the economy to grow can debt be cut.

European Commission President Jean-Claude Juncker said last night that Athens must take major steps to compromise with its international creditors but a Greek exit from the euro zone was not an option.
Even if Greece did default, wise heads say it would be easier to deal with the chaos within the euro zone rather than outside.

The aim is to achieve a technical-level accord that would enable euro zone finance ministers to declare when they meet on May 11 that there is a prospect of concluding Greece’s bailout review successfully.
That could give the European Central Bank grounds to permit Greek banks to buy more short-term treasury bills, easing the government’s cash crunch. Thereafter, 7.2 billion euros remaining in the bailout pot could be made available.

Greek Deputy Prime Minister Yannis Dragasakis will meet European Central Bank President Mario Draghi in Frankfurt today. Finance Minister Yanis Varoufakis, somewhat sidelined from the negotiating process, will meet his French counterpart, Michel Sapin, and EU economics commission Pierre Moscovici in Paris.

With two days to go until election day, the latest opinion poll has Britain’s Conservative and Labour parties tied at 33 percent of the vote. The aggregated poll of polls tells a remarkably similar story and has barely budged in two months of campaigning.

The Conservatives look marginally more likely to win the largest number of parliamentary seats but the way the country is carved up electorally means they would need to be several points ahead of Labour in share of the vote terms to be confident of securing an overall majority.

Further complicating the arithmetic are the facts that Scottish Nationalists are poised to trounce Labour north of the border while anti-EU UKIP will take a lot of Conservative votes in England.

With economic recovery entrenched, political history suggests an “incumbency factor” should kick in for the Conservatives when people actually go into the polling stations though they haven’t helped their cause with overwhelmingly negative campaign tactics.

If so, they may be able to govern again with the Liberal Democrats although many of those pro-European centrists are reluctant to repeat the bruising experience of the last five years which has seen their support collapse.

However, Labour has better partner options than the Conservatives – the left-wing SNP could win 50 seats or more while the LibDems will be lucky to get 30 – so Ed Miliband could form a government even if the Conservatives win more seats.

Prime Minister David Cameron has promised an “in-out” EU referendum by 2017 if he is returned to power.

A separate poll last night showed Britons are more likely to vote to stay part of the European Union than leave in a future membership referendum, with only 18 percent saying they would definitely elect to exit the bloc. Around 34 percent said they would definitely vote to stay in the EU, and a further 18 percent would probably vote do so.

The European Commission will produced its spring economic forecast for all member states. Low oil and food prices, a weak euro and the ECB’s money printing could see a general upgrade to growth forecasts.

According to French newspaper Le Journal du Dimanche, it will raise its 2015 GDP growth forecast for France to 1.1 percent from 1.0 percent while cutting its forecast for France’s 2016 growth to 1.7 percent from 1.8. Separately, Bank of France Governor Christian Noyer will publish the central bank’s annual report.

 

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