Greece, Missing I.M.F. Payment, Is Called Effectively in Default
ATHENS — The International Monetary Fund said shortly after midnight on Wednesday that Greece had missed a crucial debt payment to the fund, deepening a sense of crisis that has haunted world leaders and financial markets over the past week.
“We have informed our executive board that Greece is now in arrears and can only receive I.M.F. financing once the arrears are cleared,” Gerry Rice, a spokesman for the fund, said.
The development came as Greece’s European creditors each separately rejected an 11th-hour attempt by Athens to extend the country’s international bailout program.
Greece is not technically in default, but missing the payment of 1.5 billion euros, or about $1.7 billion, is yet another unmistakable warning that the country will probably be unable to meet its other obligations in coming weeks, to its bond holders and to the European Central Bank. That might make the bank, one of the country’s chief creditors, less willing to continue emergency loans that have been propping up Greek banks for the past several months.
Newspapers were on display in central Athens on Tuesday, the deadline for Greece to make a debt payment of 1.6 billion euros to the International Monetary Fund. Credit Aris Messinis/Agence France-Presse — Getty Images
By declaring Greece in arrears, the I.M.F. avoided using the term “default.” Credit rating agencies also will not consider Greece in default based on missing the I.M.F. payment, because the I.M.F. is not considered a commercial borrower.
But the ratings agency Standard & Poor’s said in a statement on Tuesday that it would designate Greece as in default if the country could not make payments to private creditors, like €2 billion in Greek Treasury bills that are due on July 10. (The I.M.F. declined to comment on whether it expected Greece to make the payment it just missed sometime in the future.)
With just hours to go before the deadline for the payment, the Greek prime minister, Alexis Tsipras, had asked the other nations that use the euro to provide another bailout that would buy Athens time to renegotiate its crippling debt load.
Finance ministers of those countries discussed the proposal on Tuesday night and left open the possibility that Greece could eventually win a new aid package, but dashed any hopes Athens had for immediate action. Chancellor Angela Merkel of Germany had said earlier in the day that no deal with Mr. Tsipras’s government could be negotiated until after a referendum on Sunday in which Greeks will be asked to accept or reject an offer made last week by Greece’s creditors.
Greece now joins the roster of countries — including some of the poorest and worst governed — that have missed payments to the I.M.F. Also on that list: Zimbabwe, Sudan and Somalia.
Greece becomes the first developed country to miss a payment, and it was the largest missed payment in the fund’s history. Sudan still owes about $1.4 billion from loans acquired in the 1980s, according to the fund.
Other countries that have fallen behind more recently include Iraq, Bosnia and Afghanistan. All three eventually settled their obligations to the fund.
Jacob Funk Kirkegaard, a senior fellow at the Peterson Institute for International Economics in Washington, said delinquency would put Greece in ignoble company.
“They are joining countries we would normally regard as failed and failing states,” Mr. Kirkegaard said. “The symbolism is quite dramatic.”Jeroen Dijsselbloem, the head of the Eurogroup of finance ministers, said late Tuesday night that Greece was effectively in default and could now face even tougher conditions for a new aid package.
“I think the fact of the matter is that Greece is in default or will be in default tomorrow morning on the I.M.F. and also, I believe, on a loan to their own central bank,” Mr. Dijsselbloem told CNBC. “But they will be in default, and I don’t think I can alter that in the short term.”
Mr. Tsipras on Tuesday requested more aid from the European bailout fund, the European Stability Mechanism, but a new program would require a number of procedural steps and raise significant new challenges for Greece.
“Any talks about a future program will have to be discussed in the Eurogroup” and “will have to be assessed by the institutions,” Mr. Dijsselbloem said.
He was referring to the three institutions — the European Commission, the I.M.F. and the European Central Bank — that oversee Greece’s compliance with the terms of the two giant bailouts it has been granted in the last five years.
The I.M.F. has not granted a request to delay repayment since the 1980s, making it highly unlikely that Greece would be given different treatment. The change of policy came about because the fund determined that giving extensions to countries that fell into arrears did not produce benefits for those countries.
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