Greece came close to not paying IMF

The Greek government is hoping that it will be able to reach a technical agreement with lenders this week, paving the way for it to receive the funds that would allow it to continue meeting its obligations.

The difficulty the coalition is facing in servicing its debt and paying pensions and salaries was highlighted by events a few days ago, when – as Kathimerini can reveal – Prime Minister Alexis Tsipras wrote to International Monetary Fund Managing Director Christine Lagarde to inform her that Athens would not be able to pay the 750 million euros due to the Fund on May 12 unless the European Central Bank allowed Greece to issue T-bills.

Kathimerini understands that the letter, sent on Friday, May 8, was also delivered to European Commission President Jean-Claude Juncker and ECB President Mario Draghi. Sources also said that Tsipras called US Treasury Secretary Jack Lew to inform him of the situation.

It was only over the weekend that a decision to pay the IMF was taken after it emerged that Greece could use some 650 million euros denominated in Special Drawing Rights issued by the IMF and held in a reserve account to meet the debt repayment. The government provided another 90 million euros from other sources to make the payment on May 12.

An internal IMF memo leaked by Channel 4 in the UK indicated that Fund officials see Greece’s negotiations with its lenders as being finely balanced. They note that some progress has been made but that the “process is still problematic” as Greek negotiators seem to have “limited room” for maneuver and staff at the institutions do not have access to ministers in Athens.

The note sees progress in the areas of value-added tax, tax administration and an insolvency framework but says that there have been no advances at all in other areas, including on setting new fiscal targets.

The IMF officials also express concern that the government is reversing some of the reforms implemented in previous years, especially in terms of the labor market. The memo also raises again the issue of the sustainability of Greece’s debt, saying that there is an “inverse relationship” between the reforms being asked of Greece and the sustainability of its debt. The note, however, says that the Fund is not “pushing European partners to consider a debt relief.”