The IMF delivered a shot across the bow of EU creditors on the Greek crisis at the summit in Riga last month, the details of which started leaking to the media last night: the fund said it could withhold its share of the €7.2 billion bailout aid Greece needs to stay financially afloat unless the country’s debt comes down—which many took to mean that lenders would have to take a haircut on their Greek holdings. The Financial Times has more details on the nuances of what was said in Riga:
Officials involved in the talks said the IMF was not seeking large-scale debt relief immediately. Instead, it was warning that any concessions to Athens that allowed the government to post lower budget surpluses — the likely trajectory of the current talks — would require debt relief to make up the difference.
Even with all the nuances and bureaucratic smooth-talking, Greek markets took a tumble in response to the news, and the reaction from European leaders was swift as well. Pierre Moscovici, the European commissioner for economic affairs, today said the debt “can only be discussed after we have agreed to a reform program,” reflecting a deeply-held allergy in Brussels to haircut talk.
Insiders to the negotiating process say the most recent talks on said reform program are progressing reasonably well and that Greece is making concessions its creditors have wanted all along. But it’s still a race against the clock, as events within Greece seem to be taking on a logic of their own:
In a sign of the country’s rapidly deteriorating finances, tenders issued by the municipal port fund of Rethymno in Crete refer to life outside the euro.
By including a clause referring to “any national Greek currency at the time”, the port authority hedges its bets in case Greece exits the euro. It is believed to be the first such clause issued in a Greek contract.
Contracts referencing a non-existent Greek currency set an important precedent, and are a sign of just how close to the edge of the precipice the Europeans and Greeks are dancing these days.