The Greek newspaper Kathimerini reported the request today. The IMF is expected to approve the request since it is allowed under the rules. That would mean Greece does not have to pay the first tranche of 300 million euros due on Friday. That chunk of debt was one of the biggest on Greece’s repayment schedule. Christine Lagarde said she was surprised by the move as up to now the Greek government had been insisting it would meet the payment. Finance Minister, Yanis Varoufakis, admitted that Greece was simply running out of money. Greece only managed to make earlier payments through collecting spare cash from local governments and pension plans, and raiding emergency reserves at the IMF. The rest of the bailout cash is needed desperately. Greece must pay 1.5 billion euros to the IMF in total this month. Gerry Rice, an IMF spokesperson said that the Greek authorities had informed the Fund that they plan to bundle the payments into one which would come due June 30. The Greek government will also face a bill of 1.5 billion euros for wages and salaries as well on the same date. While creditors have presented Greece with their own plans for solving the crisis, Greek Prime Minister says that the plan Greece had presented had the only “realistic proposals on the table.”
The decision of the Greek government not to make the Friday payment may be the result of pressure from within the Syriza party. On Thursday morning, Tsipras was still claiming the payment would be made. Christine Lagarde had dismissed talk of Greece using the bundling option. Many in Syriza are criticizing the government for not having a plan to deal with an outcome where there is no deal, a Plan B. Tsipras and his finance minister Varoufakis have continued to insist a deal is near and that they will do whatever is necessary to reach a successful conclusion to negotiations. Yet so far the Greek government has not been willing to accept demands for pension and labor market reforms and differences still appear to remain on taxation as well.
So far,Greece has not resorted to capital controls. Deposits by households and businesses in Greece fell 3.5 per cent in April and were down a whopping 17 per cent from a year ago. Funds are flowing out of the banks and out of Greece and the banks are staying afloat only through Emergency Liquidity Assistance (ELA) provided by the European Central Bank. Should the ECB decide to withdraw that assistance the banks could fail. In 2013 Cyprus imposed capital controls to stop the outflow of funds there. Greece may be forced into a similar move.
