Why has Greece delayed today’s IMF payment?
The Greek crisis has been with us for what seems like forever but it does seem as though this month might finally see the end game play out in one way or another, with Greece either defaulting on its debts and leaving the euro or instead reaching an agreement with its creditors, a deal which is acceptable to the Greek people of course.
Today though, Greece made a somewhat strange move by becoming the first country to delay a payment to the IMF (International Monetary Fund) since Zambia in the mid-1980s. Greece was scheduled to pay €300m to the IMF today – which would have been the first of 4 payments due this month – but it has instead opted to make use of a seldom used piece of IMF legislation in order to delay today’s payment until the end of June, when it says it will then pay all four of June’s payments (totalling €1.5bn) in one larger payment. What makes this move even more unusual is that Greece has said that it does have the funds to make the payment, but it has instead chosen not to. So why did Greece do this? Here are 4 possible reasons.
Greece doesn’t have the money
It’s possible that Greece doesn’t actually have the money to make the IMF payment and it is instead using the deferred payments option to buy itself more time to do a deal with the IMF and all of the other parties involved, in order to make the payment at the end of the month once it has secured a deal and has the funds.
Greece could also be delaying this month’s debt payments in order to unsettle the markets and scare European leaders and creditors into making more concessions, giving Greece a more favourable deal. With the two sides of this negotiation seemingly unwilling to compromise however, it doesn’t seem likely that any amount of brinksmanship will force the hand of Greece’s European counterparts.
Holding onto the cash in case of default
I think it’s true to say that no one really knows just how far Greece is willing to go in its standoff with the rest of Europe. Could it really be willing to default on its debts and leave the Euro, in the hope of making a success of going it alone? If the Greek government does see this as a real option, then it could be delaying this month’s payments until the game has played out and it knows whether a default is inevitable or not. If this is the case then the delayed payment may be Greece’s way of holding onto as much cash as possible to see it through the economic turmoil which would likely follow a default.
Allowing time for a referendum or snap election
There is, of course, still a chance that European creditors and officials will come up with a new deal for Greece, one which is more acceptable to the Greek government and the Greek people. If this does happen then the Greek government may want to put the deal to the Greek people in the form of a referendum, so that they can decide if they want to accept it or refuse it. If the Greek people refuse to accept the deal and Greece defaults as a result, Greece may again want to keep as much money in the bank as possible to see it through the turmoil.
Why do you think Greece has delayed the payment?