Greece will default on its bailout loan on June 5 if policymakers fail to reach a new accord in the coming weeks, a leaked document from the International Monetary Fund showed on Saturday. The specter of a Greek default has grown since Athens was granted a four-month extension back in February, as talks have broken down repeatedly over demands for economic reforms.
Greece and its Eurozone partners failed to reach a deal that would lift the impasse at last week’s Eurogroup meetings, where talks were aborted over demands that crossed Syriza’s “red lines.” Those red lines included cutting state wages and pensions.
Greek Prime Minister Alexis Tsiprias said on Friday his government wwas not prepared to strike a deal at any cost.
“There’s no doubt that an agreement must be reached,” Tsipras said on Friday according to Bloomberg News. “But those who think that the Greek side’s resistance can be tested or that its red lines will fade as time passes, would do well to forget it.”
As the clock ticks down to the widely reported end-of-June deadline, the International Monetary Fund has given clear indication it refuses to be part of any future bailout program with the Greek government. A leaked document on Saturday acknowledged that Greece would not be able to meet its loan obligations to the international lending institution, despite the government’s repeated assurance that it would repay its loan in full.
In a memo dated May 14, the IMF’s staff acknowledged that, “There will be no possibility for the Greek authorities to repay the whale amount unless an agreement is reached with international partners.”
IMF staff have said that the June 5 commitment of €1.5 billion was the first payment that could be missed, leading to a technical default in early June as opposed to the end of the month. With such a tight timetable, next week’s European Union summit in Riga could be the last chance to reach an agreement before Greece faces the prospect of default.
Probability of Default Rises
Analysts have raised the probability that Greece will default on its loans and exit the euro area. Last month economists at UBS said there was a 50-60 percent chance of default and 20-30 percent chance of a Grexit.
Analysts at Bloomberg last month said the chances of Greece missing some of its payments was 40 percent and the likelihood of a Grexit scenario was 40 percent.
A recent poll by Reuters suggested that a quarter (23 percent) of traders expect Greece to leave the euro.
However, these prognostications do not factor in the latest round of hostilities between Greece and the IMF and Athens’ growing defiance over its red lines.
The cash-strapped Greek government faces a daunting repayment schedule in June after tapping into emergency reserves last week to secure a €750 million debt payment to the IMF.