Robbing Peter to pay Peter.

Photographer: JOHN THYS/AFP/Getty Images

Greece's Payment Plan Is a Shell Game

Mark Gilbert is a Bloomberg View columnist and writes editorials on economics, finance and politics. He was London bureau chief for Bloomberg News and is the author of “Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable.”
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"I love deadlines; I like the whooshing sound they make as they go by," wrote Douglas Adams, author of the "Hitchhikers Guide to the Galaxy." He'd have found plenty to admire in Athens in the past few months, where the whooshing has become deafening. Greece's international creditors are probably less pleased by the sound -- although judging from the desperate method the country used to meet today's debt payment there may not be many deadlines left to miss.

Greece's Fiscal Odyssey

Greece has to pay the International Monetary Fund about 750 million euros ($847 million) today. To avoid a default, the nation pulled out 650 million of reserves -- from its account at the IMF, according to Greece's Kathimerini newspaper. It's the equivalent of writing a check to yourself to clear your bank overdraft; and the deadline it sets for Greece may turn out to be the most serious one yet for the nation.

Greece has to replenish its IMF funds within a month, Kathimerini says. With the IMF already struggling with its own rules that forbid it from throwing good money after bad by lending to governments that aren't at least on a path to fiscal rectitude, Greece may have done nothing better than exchange one kind of default for another. The hackneyed phrase "kicking the can down the road" has never seemed more apt.

The government said today it raised 600 million euros from an April 20 government decree that ordered state organizations to transfer their cash balances to the central bank. That's not a lot of money; especially when you recall that officials said at the time that the confiscation could raise as much as 2 billion euros for the government's depleted coffers.  

The current state of play between Greece and its creditors doesn't seem very different from a week, a month or a quarter ago. While Varoufakis uses words like "considerable convergence" and "progress" and "major concessions," German Finance Minister Wolfgang Schaeuble speaks of still being "far away" and the risk that a country can "suddenly become unable to pay its bills."

On Monday, Schaeuble raised the prospect of the Greek government consulting with its citizens to accelerate progress:

The alternatives Greece has all lie in Greece and if the Greek government thinks it should hold a referendum, it should hold a referendum. Maybe it would even be the right measure to let the Greek people decide whether they’re ready to accept what needs to be done.

Schaeuble makes a good point. A referendum would be a smart way to resolve Greeks' baseline schizophrenia of saying in polls that they want to stay in the euro, at the same time as they're led by an anti-austerity government that is reluctant to make any concessions in order to keep the currency.

If the government doesn’t move soon, though, there won't be time for a referendum. Jeroen Dijsselbloem, head of the Eurogroup and Dutch finance minister, said today that while partial reform implementation could trigger partial Greek aid payments that would avoid a default, that plan would be delayed if the government seeks permission from the public.

"Each week becomes more precious than those that have passed because the weeks remaining are fewer and fewer," French Finance Minister Michel Sapin said today. By robbing Peter to pay Peter, Greece has exposed its desperation. Even with all the deadlines that have blown past in recent months without triggering catastrophe, it really does feel like one minute to midnight until Greece turns into a defaulting pumpkin. 

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Mark Gilbert at magilbert@bloomberg.net

To contact the editor on this story:
Cameron Abadi at cabadi2@bloomberg.net