Greece Defers IMF Payment as Merkel Says Resolution Far Away

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Bold Move for Greece: IMF Payments Will Be Bundled

Greece became the first country to defer a payment to the International Monetary Fund since the 1980s as its game of brinkmanship with creditors goes down to the wire.

With Prime Minister Alexis Tsipras getting ready to address parliament on Friday after receiving a list of creditors’ demands, the step underscores the state of the country’s shriveling finances. While international officials have reported some progress in recent days, German Chancellor Angela Merkel said “we’re still far from reaching a conclusion.”

The current phase of Greece’s crisis is nearing its conclusion as the country runs out of money after four months of deadlock. Stocks and bonds have whipsawed this week amid a flurry of political activity starting with a late-night meeting in Berlin between European leaders and the IMF on Monday.

“The delay in the payment to the IMF is an escalation of the confrontation,” Nicholas Economides, an economics professor at New York University’s Stern School of Business. “It increases the risk of bankruptcy and Grexit.”

A call between Tsipras, Merkel and French President Francois Hollande late Thursday was constructive, a Greek government official who asked not to be named said by e-mail. Tsipras said the creditors’ proposal can’t be the basis of a deal.

Greece rejected the latest proposal from its international creditors, with the Finance Ministry saying the plan “can’t solve the riddle” and an agreement requires “immediate convergence of the institutions to more realistic” proposals.

The euro fell 0.3 percent against the dollar to to $1.1238 at 3:50 p.m. New York time, after rising to $1.1318 following a report that Greece requested the IMF payment delay.

1970s Policy

Greece on Thursday told the IMF it would delay a debt payment of about $339 million (301 million euros) due Friday, submitting a request to the fund to bundle payments totaling about $1.7 billion due this month into one lump-sum payment.

“The Greek authorities have informed the fund today that they plan to bundle the country’s four June payments into one, which is now due on June 30,” IMF spokesman Gerry Rice said in an e-mailed statement. “Under an Executive Board decision adopted in the late 1970s, country members can ask to bundle together multiple principal payments falling due in a calendar month.”

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Only one country, Zambia, has used the procedure to bundle payments, which happened in the mid-1980s, another IMF spokesman, William Murray, said last week.

Working Group

The Euro Working Group of euro-area finance ministry officials expects Greece to respond to a European Union proposal to conclude the country’s bailout by June 8, according to a person familiar with the talks. The group, which met Thursday in Brussels, hasn’t set a target date to conclude discussions with Greece, said two people who requested anonymity, citing a lack of authorization to speak publicly.

Tsipras, who met European Commission President Jean-Claude Juncker in Brussels Wednesday, will address the Greek parliament at 6 p.m. local time on Friday, a Greek official said, with the euro region pressing for an agreement to be wrapped up by June 14. A European official said Greece will study the offer from its creditors and respond on Monday.

The payment delay probably means the Greek government believes it can get an agreement through parliament by the time liquidity is released, said Jacob Funk Kirkegaard, senior fellow at the Peterson Institute for International Economics in Washington. Alternatively, it could indicate that the government is “desperate” and clinging to the “false hope” that the IMF and U.S. will put pressure on euro-area officials, he said.

Achieving Goals

“In the end, their own lack of clarity about what they actually want means they will fail to achieve any of their goals,” Kirkegaard said of Greece.

Greece’s move on the IMF payments marked a shift from hours earlier. “Don’t worry,” Tsipras said after the Brussels meeting, when asked by reporters about Friday’s IMF payment. IMF Managing Director Christine Lagarde, asked at a press briefing Thursday morning in Washington about the payment, cited those comments by Tsipras, saying she was confident Greece would honor its obligations.

Less than three hours later, news outlets including Greece’s Kathimerini newspaper reported that the nation had requested the delay. The IMF then issued a confirmation.

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