Lagarde Won’t Give Support to Greece Missing IMF Payment

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Lagarde: Won't Support Greek Payment Delay

International Monetary Fund Managing Director Christine Lagarde warned that she wouldn’t let Greece skip a debt payment to the lender, shutting down a potential avenue to buy the Greek government some financial leeway.

“We never had an advanced economy actually asking for that kind of thing, delayed payment,” Lagarde said in an interview Thursday in Washington with Bloomberg Television. “And I very much hope that this is not the case with Greece. I would certainly, for myself, not support it.”

Greek officials told their creditors earlier this month that they might run out of money and miss a repayment to the IMF, according to three people familiar with the negotiations. The payment went through, and Greece’s warning was seen as just an element of the ongoing discussion, one of the participating officials said.

The threat of a Greek default is among the risks to the global economic outlook discussed at the IMF and World Bank spring meetings this week in the U.S. capital. Speaking in Washington Thursday, Greek Finance Minister Yanis Varoufakis signaled a commitment to finding a compromise that revives Greece’s economy, saying “this negotiation must succeed” and stressing that his country isn’t “toying” with an exit from the euro area.

Payment Due

Greece must pay the IMF roughly $1 billion next month. Missing a payment would put Greece in a club that includes Zimbabwe, Somalia and Sudan, countries that hold the dubious distinction of having fallen into arrears with the fund. Lagarde said the IMF hasn’t allowed a country to delay a debt payment in 30 years.

At the same time, a skipped payment to an official creditor wouldn’t constitute a trigger to lower Greece’s rating to selective default under Standard & Poor’s criteria, the rating agency said Wednesday as it cut Greece’s rating to CCC+.

Greek bonds plunged Thursday, pushing the yield on notes due in 2017 to the most since the height of the euro-area debt crisis in 2012, amid speculation the country won’t secure the release of aid needed to meet its obligations.

Varoufakis inquired this month during talks with the IMF what would happen if Greece missed a payment to the lender, a person briefed on the matter said.

Varoufakis said in an e-mail to Bloomberg News that he never asked to be informed about the process of skipping a payment to the fund, saying such suggestions are outright lies. The Financial Times first reported earlier Thursday that Greek officials had approached the IMF about not making a payment.

Lagarde Meeting

Varoufakis met with Lagarde in Washington on Thursday, according to the Greek Finance Ministry, before making his case in a speech at the Brookings Institution.

In the remarks, Varoufakis said that while liquidity is drying up in his country and “urgent and extensive” reforms are needed, Greece isn’t willing to accept a deal that keeps the country in a cycle of dependency.

“Our government is keener than anyone to bring these negotiations to a successful conclusion,” Varoufakis said. “The operative words here are: ‘successful conclusion’ -- not yet another version of ‘extending and pretending’ of the sort that, for five years, has been turning a drama into a crisis of global significance.”

He said government asset sales need to have employment and environmental considerations, and Greece won’t accept privatization “fire sales” that don’t reduce debt. Reducing low pensions isn’t reform, he said, and copying the IMF’s rules on labor deregulation is “useless” for Greece.

Never ‘Compromised’

“We will compromise, we will compromise and we will compromise in order to come to a speedy agreement, but we are not going to end up being compromised,” Varoufakis said, adding that he hoped to reach a deal with euro-area partners by the end of June.

Talks on resolving Greece’s financial crisis must “intensify” if euro-region finance ministers are to be able to assess the country’s reform commitments when they meet at the end of next week, the European Commission said Thursday.

“At this stage, we are not satisfied with the level of progress,” Margaritis Schinas, spokesman for the European Union’s executive, told reporters in Brussels. “Everything is now on the table and what we need is to progress swiftly.”

Greece has not yet produced the “full list of reforms” demanded by EU leaders at a summit last month, Schinas said. The proposals must be assessed by the European Commission, the European Central Bank and the IMF before the country can get any additional payments from a 240 billion-euro ($258 billion) bailout.

Germany’s Line

German Finance Minister Wolfgang Schaeuble, in an interview Wednesday with Bloomberg Television in New York, ruled out further concessions to Greece, saying it’s up to Prime Minister Alexis Tsipras’s government to commit to the reforms needed to release aid rather than give false hopes to its people.

Schaeuble, asked about a report in German weekly Die Zeit that his office was working on a plan to keep Greece in the euro area if the country defaulted, denied the report while saying that ministry staff were “taking just about everything into consideration.”

“Despite the cacophony and erratic leaks and statements in recent days from the other side, I remain firmly optimistic that there will be an agreement by the end of the month,” Tsipras said in a statement to Reuters Thursday. “Because I know that Europe has learned to live through its disagreements, to combine its parts and move forward.”

Public Protest

Along with the international pressure, Tsipras is facing the first signs of domestic discontent with his government. About 4,000 miners and their families descended on Athens’ main central square Thursday over a plan to possibly revoke the license of a gold mine in the north of the country, which would halt investment in the project.

It’s the first mass street protest against the government since the Jan. 25 election that catapulted Tsipras to power. While opinion polls still show Syriza enjoys a solid lead over opposition parties, and the majority of Greeks support its refusal to implement austerity measures attached to the country’s bailout, the gathering suggests blanket public support for Tsipras’s policies may be waning.

“The honeymoon is over,” said Nikos Marantzidis, a pollster and political science professor at the University of Macedonia in Thessaloniki. “This doesn’t mean that Syriza’s hegemony is under dispute but we’re done with the period when Greek public opinion would agree with everything that the government does.”

(An earlier version of this story was corrected to clarify that a Lagarde comment referred to delaying payments and not falling into arrears.)

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