‘Greek government’s responsibility for debt crisis approximately zero’
Interior Minister Nikos Voutsis on Sunday dropped a bombshell when he announced that the four installments for the IMF in June, valued at €1.6 billion, “will not be given and is not there to be given.” The comments come as the Syriza-led government is negotiating with the European Union, European Central Bank and the International Monetary Fund to release the final €7.2 billion tranche of its €240 billion bailout.
RT:Greece ran out of money. What does this mean?
James Galbraith: This is a statement by the interior minister and we can take it at face value that at this point they do not have the funds to meet the payment on June 5, which is €300 million. I’ve seen some contradictory reports on that. They may or may not be able to make that particular payment, but June is a big problem.
Do they end up in default? Technically, if they miss a payment to the IMF the answer to that is “no,” not necessarily. A determination of default can come after a certain grace period, which might be 30 days or a bit longer. Basically, if they don’t make the payment, they miss the payment, and they’re in arrears and that will be the situation at that time.
RT:Is it the Syriza government's fault that there is no money?
JG: The Syriza government came in in January in the wake of five years of catastrophic economic performance in Greece. They faced a series of very high hurdles, very high payment deadlines that they have met so far by dipping into the reserves of the Greek government. They have been trying to close those negotiations to complete what is called the second program, which would give them access to about €7.2 billion in disbursements that should have come last August.
They have not been able to access that money. That is the situation that they face. Their own responsibility for this situation is approximately zero - this is a very tough situation that the new government came into. The previous government was very well aware that this would be the situation in the spring of 2015.
RT:Default is a scary word the EU and Germany were trying to avoid at all costs. If it is imminent now, what could be the consequences, and what can be done?
JG: Default, to be clear, is a technical and legal term, and it is a state which is declared by the creditor, not by the debtor. So it is really would be up to the IMF at a certain point to say: “We judge that Greece is in default.”
Also, if one looks at the way the rating agencies handle it, which is crucial for the stability of the banking system, my understanding is that they focus on private debts, and Greece is not defaulting to its private creditors; so its government bonds would not necessarily be downgraded in a way that would affect the liquidity of the banking system. In other words, the life support which is being given by the European Central Bank [ECB] could still continue at least for a time after a missed payment to an official creditor like the IMF.
RT:What kind of options does Greece have at this point?
JG: There are basically two options. One is to conclude successful negotiation in respect of the so-called red-lines to the Greek government, which basically have to deal with pensions and with worker rights and labor markets. And the other is really a decision of the European side, then they would be in the position of proceeding to other measures, which may become necessary.
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