Greece short of cash for March IMF payments

Alexis Tsipras

Greece is struggling to meet its commitment and make March payments to the International Monetary Fund.

The first payment due is this Friday March 6 in the amount of 310 million euros but the total payments due this month are 1.5 billion($1.7 billion US) euros. The government may be forced into "borrowing"  state pension and social security funds or even European Union farming subsidies to meet its obligations to the IMF.

While Greece will be able to meet it obligations over the short term, it faces even larger payments not long after the four month extension period of the present bailout ends in four months. In July and August 6.7 billion euros in European Central Bank bonds mature.

The Greek Finance Minister, Yanis Varoufakis, claimed he would "squeeze blood out of stone" to make the IMF payment. He also said: "It would be excellent if we could agree with our partners to smooth over this cash flow hump that we are facing over the next few months."

Many experts believe that Greece will require a third bailout package after the extension period runs out in order to pay off the EU bonds maturing during the summer. Dr. Michael Arghyrou, of Cardiff Business School said that either Greece defaults on its loan payments and exits the euro zone, or it must agree to a third bailout package.

While Prime Minister Tsipras says he does not want to leave the euro zone, he claims also that Greece will not request a third bailout. He will probably actually negotiate another bailout but call it by another name perhaps "new arrangements".  

He pulled off a similar stunt after he refused to deal with the Troika (European Commission, European Central Bank, and International Monetary Fund). They are now always referred to as "the institutions" but are carrying out the same role as they did earlier of overseeing the bailout and determining whether the terms are being satisfied by Greece.

Although Syriza promised during the election campaign that at least some Greek debt would be written off, since being elected, it has stressed that it would honour all its debt obligations. Jens Bastian, an analyst for Macropolis a provider of data and analysis on Greece said that it was not in the interest of Greece to default on any of its IMF obligations. If they did so, the government would face even greater difficulties borrowing money to pay off other debts. Bastian maintained: “The Greek government has identified IMF payment as an absolute political priority. You may be able to solve repayment obligations in March. The bigger problems are looming around the corner in July and August.”

Greek's creditors are unlikely to provide Greece with any sort of financial break to help it out of its troubles. On the contrary, it will use them as leverage to force Syriza to enact reforms and follow policies that are in the interests of creditors and investors even though they bring even more hardships on the Greek populace. As Valdis Dombrovskis whose job is to monitor Greece's compliance with the conditions of the bailout program puts it: "In this case, they will need to speed up program implementation".  

The Greek government can look forward to a long hot summer of negotiations with its creditors. The demands of creditors will ensure that Syriza will be able to carry out few if any of its campaign promises except to stay in the euro zone.

Perhaps the party will come to realize that this is the promise they should break if they are ever going to keep their other campaign promises, even if in the near term Greeks will suffer even more.

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