FT reports that Greek officials have made an informal approach to the International Monetary Fund to delay repayments of loans to the international lender, highlighting the perilous state of Greek finances, but were told that no rescheduling was possible.
According to officials briefed on the talks by both sides, Athens was persuaded not to make a specific request for a delay to the Fund, which is owed almost €1bn in two separate payments due in May.
Although Athens was rebuffed, the discussions, which occurred in private earlier this month, are a sign that the Greek government is finding it increasingly difficult to scrape together enough money to continue to pay wages and pensions while meeting its debt payments to external lenders.
Yields on Greek bonds soared on Thursday following the news, with yields on three-year paper rising 134 basis points to 25.10 per cent, the highest since the country’s restructuring. Its 10-year yields climbed 45 basis points to 12.18 per cent…
MF officials have repeatedly said that a rescheduling of repayments can only come as part of a completely renegotiated new bailout programme. Were it to miss a payment, Greece would become the first developed economy to go into arrears at the Fund, something only counties like Zaire and Zimbabwe have done in the past…
One source briefed on the approach said the proposal was to “reshuffle the repayment schedule for the IMF loan over the coming months,” allowing the new Greek government led by Alexis Tsipras to have the money to pay bills for pensions and public sector salaries while negotiating with European creditors over payment of the next tranche of bailout loans.
Greece owes the International Monetary Fund 1.6 billion next month and failure to come up with an acceptable plan means guaranteed default. Christine Lagarde stated at the latest World Bank meeting in Washington, “that the IMF has never had an advanced economy asking for payment delays. Additional financing means additional contribution by the international community – some of which are in much direr situations than the country eventually seeking those delays.”
Greek Prime Minister Tsipras said he remains firmly optimistic the Greek government and its creditors could reach a deal in the near future. He said the two sides disagree on four areas: labor issues, pension reform, an increase in value added taxes and privatizations referring to them as “development of state property“.
Meanwhile, Standard and Poors rating agency has downgraded Greece’s credit rating to CCC+/C saying it’s debt and other financial commitments will be unsustainable. News flash, both Greece and its creditors are already well aware of this unpleasant truth. Even socialist countries eventually grow weary of lending money that will never be repaid.
Federal Reserve nemesis, Asian Infrastructure Investment Bank has approved 57 countries as founding members according to China’s Finance Ministry. “The founding members will have priority over countries that might join later possessing the right to establish the rules for the bank.” Reading between the lines, “When we said we were going to remove U.S. dollar hegemony from global trading, we were serious.” The only thing China could not have foreseen is the speed in which America’s “friends” would jump ship.
Washington has pleaded with its allies not to join the AIIB but requests have gone almost completely ignored. Japan and the U.S. are the only two major countries left standing on the outside looking in. China, other foreign nations and our “ex” allies have placed themselves in strategic position to trump Washington, the Fed and the U.S. dollar. Next step, mass unloading of U.S. debt; it’s coming.
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