The real value of Greece's debt repayment

Greece repays €448m of debt to the IMF. Only €299,552m or so to go, then.

by Adam Gale
Last Updated: 25 Jun 2015

Owing to its continued usage of the Julian calendar, the Greek Orthodox Church is preparing to celebrate Easter this Sunday, a week after its western brethren. There may be a few premature cries of alleluia in Athens, however, owing to a financial miracle that has just occurred - Greece has made one of its debt repayments, wiring €448m (£327m) to the IMF this morning.

Okay, the Syriza government made four similar payments in March, so it may not be a miracle, but it’s at least a welcome relief. There had been doubts that Greece wouldn’t be able to find the cash, after a ‘senior official’ told the Telegraph last week that the government couldn’t pay its €1.7bn wages and pensions bill and still meet its international obligations.

‘We are a left-wing government,’ said the official. ‘If we have to choose between a default to the IMF or a default to our own people, it is a no-brainer.’

Fortunately, it seems Greece didn’t have to make that decision – at least this time. Athens managed to pay the bills by raising €1.1bn in short-term loans, the macroeconomic equivalent of going to Wonga to pay the mortgage.

Greece has been in perpetual crisis since PM Alexis Tsipras’ Syriza party came to power in January. Every time the government faces a bill – to its creditors and even to its own people – there’s a market-shaking will-they-won’t-they moment. In 2015 alone, there will be another 14 deadlines for IMF loan repayments, with a combined value of €6bn.

There will also be major crunch points in July and August when Greece has to find €3.4bn and €3.2bn respectively for the European Central Bank, alongside regular repayments of short-term treasury loans with a combined value this year of €14.8bn. The total national debt is approximately €320bn, three-quarters of which is from its bailouts in 2010 and 2012. Suddenly €448m doesn’t seem all that much...

The country will only step away from the edge if its non-troika of creditors agrees to release further funds as part of the bailout extension negotiated earlier this year, which is itself dependent on their being satisfied by the list of reforms currently bouncing back and forth between the two sides.

Even if Europe is satisfied and releases the €7bn or so that was agreed, it only delays the crisis. Europe will effectively loan Greece money so Greece can pay back its earlier loans to Europe – the indebtedness continues for the foreseeable future.

The benefit, of course, of Greece making its obligations and receiving its loan extension is that it can leave the days of crisis behind. It will find it easier to access the debt markets if it can be shown to be good for the money and working with the international community.

More to the point, who’d invest in Greece while it teeters on the edge of economic catastrophe? Even if you think a sovereign default and Grexit would eventually benefit the Greek economy, it would still mean chaos and uncertainty for the next few years.

Tsipras is in Russia, possibly hedging against a European rejection of his party’s reforms, probably trying to scare Europe into thinking his whole country could defect to Vladimir Putin. Talking to Russian students, he described Greece as being part of a ‘triangle of uncertainty’, with Ukraine and Syria. He’s perhaps not exaggerating.

Serious questions remain about whether Greece can recover while still shackled by imposed austerity. At the very least, however, making a payment when it’s due brings the country a step closer to stability and a step further from crisis, which is something for everyone to rejoice about.

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