Greece Threatens to Miss IMF Payment, Issue Drachma

Written on April 4th, 2015 in politics Comments Off

Published on naked capitalism, by Yves Smith, April 3, 2015 … Updated later, April 3.

Greece has decided to up the ante in its negotiations with the Troika. The open question is whether the latest move, the press leak via Ambrose Evans-Pritchard at the Telegraph that Greece will miss its April 9 payment to the IMF so that it can continue to make pension payments, and has started to make plans to issue the drachma, are game-changers that Greece hopes they will be.  

The sources that spoke to Evans-Pritchard said that the government would be out of funds on April 9, the IMF due date. Note this is earlier than the most recently leaked drop-dead date of April 20. The Greek government cannot make that payment and also make pension and government salary payments due April 14.

Keep this in mind:

Investors have recognized that a Grexit was a possible outcome; indeed, the financial press was treating it as a far more likely outcome than the political press. With Greece running out of money, discussion of that possibility increased last week, with Warren Buffett even saying a Grexit could be good for the eurozone versus serious pundits like Martin Wolf warning that a Grexit would pave the way for other countries to leave. But even Wolf held out the option of a managed Grexit so as to reduce the dislocation.

So the idea that Greece might leave is hardly news. And Greece has made veiled threats officially, along the lines of, “We can only be pushed so far.” The question is whether the markets have really priced that in, since an adverse market reaction would give Greece more leverage … //

… If the Greek gambit does not pressure the Troika and Eurogroup to change their position much, the government could see its approval ratings decline further. As we’ve pointed out, the government has done nothing to build support for a Grexit. While it remains popular, its approval ratings for how it is handling the negotiations has fallen from a peak of 80% to 55%. A mere two days prior to this leak, Tsipras reassured Parliament that he was seeking an “honorable compromise”. This move is yet another kolotumba, but on a matter of primary importance.

If the creditors can pull it off, their winning strategy is to keep Greece in the sweatbox. Greece has effectively admitted that is it politically toxic for them to miss or come up short on pension and salary payments. If the creditors can finesse the IMF default and can stomach funding the accelerated bank run, their strategy for keeping pressure on Greece is to act as if nothing has happened and not accelerate the negotiations or find a way to issue a small emergency payment. How this comes out is likely to reflect the strength of the relative bargaining positions of the Greece hardliners, which are the IMF and ECB, versus the more conciliatory parties, such as the European Commission and the French government. And while Merkel may lean conciliatory, she has yet to take any concrete action.

We’ll see soon enough if the creditors blink. But as you can see, it’s not clear whether they will regard the Greek threats as something they need to take seriously or a move they actually expected.

(full text).

AGAIN – latest about Greece on this blog:

Other Links:

Selfie storm: Unprecedented tweet-fest in Iran during Obama speech broadcast live, on Russia Today RT, April 3, 2015;

ONLINE, UK: Webinar debate – Universal Credit vs Guaranteed Income, Conservative Party vs Green Party – April 7 2015, on Basic Income Earth Network BIEN, by Liam Upton, April 1, 2015;

Guess What Happened When Liberia Tested a Pilot Program of Cash Transfers to the Extreme Poor in Bomi, on The News Hub, by Scott Santens in Science, April 1, 2015: Further evidence of the potential of basic income (see UNICEF, and the report, 33 pdf-pages);

The World Social Forum, Globalization & the Barbarism of Capitalism, on Zvideo (first on Democracy Now), by Samir Amin, March 29, 2015;

KenFM InTEAM #1, 57.20 min, von wwwKenFMde am 28. März 2015 hochgeladen;

INTERVIEW: Paul Craig Roberts on Kissinger, American Police State, and Russia, 33.39 min, uploaded by The Conscious Resistance, Feb 7, 2015: Derrick Broze talks with former US Assistant Secretary of Treasury Paul Craig Roberts;

Das Versagen der Mainstream-Ökonomie – Prof. Bontrup, 146.14, von ponrius0pilawa am 20. Sept 2012 hochgeladen.

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