As Greece roots around for cash to cover upcoming bills amid stalled bailout talks, one option it could consider is bundling next month’s payments to the International Monetary Fund.
The Greek leadership, at this point, doesn’t appear to be considering the option and doesn’t see it as advantageous given concerns about the signals it could send, according to people familiar with the government’s thinking.
Obscure IMF rules allow Greece to clump its principal payments into one deposit that the government could ostensibly pay later in the month, without falling into arrears. Athens owes the IMF four principal payments totaling $1.7 billion in June. Should Greece seek to take advantage of the opportunity, bundling its IMF payments would buy Greece’s government more time for negotiations in the deadlocked bailout talks.
An IMF spokeswoman declined to say whether Greece had made such a request or even inquired about the option.
Bundling payments would remove the short-term funding threat Athens has tried to use to gain concessions from Europe, says Jacob Kirkegaard, a senior fellow at the Peterson Institute for International Economics in Washington.
Mr. Kirkegaard says Greece would likely be able to pay most of the bills due to the IMF next month even though it would mean depleting any remaining cash reserves stashed around the country.
“It would buy Athens more time,” he said, perhaps giving Greek President Alexis Tsipras more political cover to cut a bailout deal, “saying he fought to the bitter end.”
But prolonging the period of economic uncertainty without a bailout deal also could very well aggravate Greece’s crisis and deepen the amount of bailout financing needed to fill the country’s funding gap and require more costly economic overhauls and budget belt-tightening.
“And it doesn’t change the fact that the real deadline remains the big payments due to the ECB,” Kirkegaard said.
It also could fuel investor fears that Greece will default on its debt before a bailout deal is reached.
The potential costs mean that, unlike the creative way Athens paid its last IMF bill, the government may decide to leave this option on the shelf.