Almost all institutions expressed their position on if it would be a default if Greece misses its $1.7 billion payment to the International Monetary Fund on Tuesday, except for one key player. On Monday its spokesman declined to comment on what stance the institution would take.
The European Central Bank, which is keeping the Greek banking system alive with almost 89 billion euros ($100 billion) of Emergency Liquidity Assistance, hasn’t said how it would react to a missed IMF payment.
Officials would have to consider the effect of any
missed payment on the solvency of Greek lenders when they discuss the
level of assistance on Wednesday, with the outcome having implications
for Greece’s membership in the euro.
As Bloomberg reports referring to three major credit-rating companies, failure to pay the Washington-based IMF wouldn’t constitute a default because that term is reserved for private-sector creditors, and the IMF avoids the word.
According to an interview with French newspaper Les Echos published late Monday, ECB Executive Board member Benoit Coeure said the central bank will keep liquidity assistance for lenders “until further notice,” while policy makers will keep reviewing the funds.
As long as banks are solvent and have adequate collateral, ELA will be available to them. There is no specific requirement that Greece stay current on its IMF payments to keep the liquidity aid afloat.
Klaus Regling, head of the euro-area states’ crisis fund that
supports Greece, said earlier in June that it has the option to
accelerate Greece’s payment schedule on 130.9 billion euros if it falls
into arrears with the IMF.
The crucial moment is when Christine Lagarde, the IMF chief, tells the fund’s board that Greece is overdue, which the IMF says would happen promptly.
As a European Union official said Saturday, Regling would then have to make a recommendation to the European Financial Stability Facility’s board of directors, who are deputy finance ministers from the euro area.
Chances that Greece will make its IMF payment are almost zero, although Lagarde told CNBC over the weekend that she still hoped Greece would fulfill the June 30 payment.
