Greece Missing IMF Payment Isn’t Default for S&P, Kraemer Says

Greece missing a repayment to the International Monetary Fund or another official creditor doesn’t qualify as a default for Standard & Poor’s, according to its managing director for sovereign ratings.

“In the strict sense we have already missed a payment to the IMF last Friday,” Moritz Kraemer said in an interview on Bloomberg television with Guy Johnson and Anna Edwards on Thursday. That’s “not a default event in the eyes of S&P.”

Greece is under pressure from its international creditors to deliver reforms in return for bailout funds needed to keep the country afloat. With the country’s cash situation worsening, Kraemer said it may only be time before Greece fails to repay bondholders or banks.

Greece delayed a payment to the IMF last week and plans to bundle about $1.7 billion due this month into one lump sum.

That’s “another sign, another indication, that the liquidity situation is becoming increasingly untenable,” Kraemer said. “On current trends it may just be a question of time when commercial creditors will experience a default as well.”

He said the “real deadline” will be in July when Greece has to pay back some of the bonds that the European Central Bank is holding. “If they miss that payment, my expectation would be that it would become impossible for the ECB to continue with emergency liquidity assistance to the Greek banking system,” he said.

S&P cut its rating on Greece’s long-term debt on Wednesday after the missed IMF payment, saying it demonstrates that the government is prioritizing pension and other domestic spending over scheduled debt service obligations. Kraemer said the debt load may be too much for the country without sustainable growth.

“There’s nothing left to pay the debt repayments that are coming and there’s probably not enough left to pay the pensioners and civil servants,” Kraemer said. “The barrel has been scraped.”

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