Categories: Media Moves

Coverage: Greece faces deadlines

It’s another critical week for Greece. While the issues with default have been looming for many months, creditors seem to be becoming impatient with their lack of repayment.

The Bloomberg story James G. Neuger, Eleni Chrepa and Ian Wishart outlined what needs to happen this week in order to satisfy creditors:

Warnings of an accidental default loom over debt-swamped Greece as Prime Minister Alexis Tsipras’ anti-austerity government heads for another confrontation with an increasingly testy German-led bloc of creditors.

Greece needs at least a symbolic show of progress at Monday’s meeting of euro-area finance ministers in Brussels to persuade the European Central Bank to keep emergency funds flowing to Greek banks at the current pace. The next hurdle comes just a day later, when Greece has to pay about 750 million euros ($840 million) to the International Monetary Fund.

Tsipras met with top cabinet ministers for several hours on Sunday to brief them on the negotiations. Athens expects the Eurogroup to officially acknowledge important progress, a Greek government official, speaking on the condition of anonymity as the talks were private, said after the meeting. Tsipras and his ministers confirmed the need for a mutually beneficial deal within the framework of the government’s mandate, the official said.

Shawn Donnan wrote for The Financial Times that Greece has until Tuesday to repay the IMF €750 million:

Monday’s meeting of Eurogroup ministers in Brussels may or may not turn out to be a make or break moment for Greece and the eurozone. There is no doubt that moment is creeping closer, however, or that the International Monetary Fund and the billions it is due to be repaid by Athens this year alone will play a central role in what happens next. Whether a deal is concluded in Brussels or not, Athens owes the IMF €750m on Tuesday.

The money is part of a repayment plan set five years ago as part of a 2010 bailout and the IMF is unyielding about that schedule. One way or another it must be repaid and be repaid on time. No advanced economy has ever defaulted on the 70-year-old IMF, which acts as a lender of last resort to its 188 member governments.

The Reuters story Renee Maltezou pointed out that many have ruled out a deal for Greece during Monday’s finance minister meeting:

The Eurogroup of euro zone finance ministers have ruled out clinching a deal to unlock aid for Greece at Monday’s meeting, saying that too many issues remain unresolved. Officials have said any statement they make is unlikely to be enough to allow the European Central Bank to raise the limit on short-term Treasury bills that Greek banks can buy, a move that would help avert a Greek national bankruptcy.

“We hope that the significant progress made will be recorded in the Eurogroup statement, which will be a positive sign regarding the prospect of reaching a final deal soon,” said a Greek government official, who declined to be named.

“What is important is to get a signal for the funding strangulation to end.”

Greece and its EU and IMF lenders remain at odds on budget, labor and pension issues but government ministers at a cabinet meeting on Sunday remained hopeful of such a statement, the official said.

Peter Eavis, Jack Ewing and Landon Thomas Jr. wrote for The New York Times that both the E.C.B. and the I.M.F. could help Greece:

In theory, both institutions could greatly ease the situation by agreeing to delay repayment, or even forgiving some of their Greek debt. But they see themselves as a special class of creditors — so-called lenders of last resort — that should not write off the money they lend.

Still, some sovereign debt specialists say that there is a case for the monetary fund to take a hit on its Greek loans. The institution, they assert, backed the policies that deflated Greece’s economy, making it harder for Greece to service its debt.

“There is no question in my mind that the I.M.F. needs to be part of the debt forgiveness,” said Ashoka Mody, a visiting professor at Princeton and formerly a senior official at the fund. “At some point, you have to give up this orthodoxy of saying, ‘This is the right way of doing things.’ This is an unusual case.”

Debt forgiveness from the central bank has even broader support from outside investors and economists because the bank avoided taking a loss on €27 billion worth of Greek bonds in its portfolio while private sector investors lost more than half of their money in the 2012 Greek debt restructuring.

The Associated Press story by Pan Pylas summed up the situation well and the implications for what would happen if talks fall apart:

For over three months, talks have dragged on as the Greek government tries to come up with a series of economic and budget reforms that will convince the creditors to pay out 7.2 billion euros ($8 billion) of bailout cash. With every passing day, the uncertainty has sharpened, to the detriment of the Greek economy. Greeks have been pulling money out of banks and investors have shied away from the country.

If the bailout talks fail, the country could default on its debts, have to put limits on the free flow of money and eventually even exit the euro. Most economists think that would cause a massive recession in Greece for at least a year as the country tries to adjust to a new, weaker currency.

Though the eurozone has shored up its defenses against such a worst-case scenario, a Greek exit would stoke jitters in the markets about which country could be headed for the door next.

Greece has a long way to go before they’re even close to digging out of their debt. The continued struggles are weighing on investors, regulators and government officials alike. And as of Sunday night, it looks like they’re far from a compromise that might ease some of the tension.

Liz Hester

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