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Business News/ News / World/  Lagarde warns no leeway for Greece on 30 June IMF payment
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Lagarde warns no leeway for Greece on 30 June IMF payment

Lagarde is helping European officials to box in Greece in a bid for force Alexis Tsipras to accept the terms of more financial aid

Under IMF rules, once a payment becomes overdue, a nation immediately becomes ineligible for additional funds until the arrears are cleared. Photo: BloombergPremium
Under IMF rules, once a payment becomes overdue, a nation immediately becomes ineligible for additional funds until the arrears are cleared. Photo: Bloomberg

Luxembourg: International Monetary Fund chief Christine Lagarde said Greece won’t be given a grace period if it fails to make a payment of about €1.5 billion ($1.7 billion) to the fund on 30 June, setting a hard deadline for the indebted nation to reach a deal with creditors.

With euro-area finance ministers converging on Brussels and bailout talks stalled, Lagarde is helping European officials to box in Greece in a bid for force Prime Minister Alexis Tsipras to accept the terms of more financial aid. Last week Tsipras said the IMF’s policies toward Greece have been “criminal."

“I have a deadline, which is the 30th of June, when a payment is due from Greece," Lagarde said at a press conference in Luxembourg on Thursday. “There is no grace period."

Greece’s bid to obtain the aid required to shore up its position within the euro is going down to the wire with its euro-area bailout agreement expiring in less than two weeks, the same day the IMF payment comes due. With the European Central Bank reviewing the emergency funding keeping the Greek banking system afloat, German Chancellor Angel Merkel signaled her desire to keep the process alive at least until next week’s summit of European leaders.

IMF rules

“I remain convinced that where there’s a will there’s a way," Merkel told lawmakers in Berlin earlier on Wednesday. “If Greek authorities show this will, then an agreement with the three institutions is still possible."

Under IMF rules, once a payment becomes overdue, a nation immediately becomes ineligible for additional funds until the arrears are cleared. IMF staffers contact the borrower to urge it to “make the payment promptly" and follow up with the nation’s representative on the IMF’s executive board, according to a 2012 IMF report.

If the payment is still overdue after a month, the head of the IMF notifies the board and after another month, the chief issues a formal complaint to the board.

While the IMF procedures stretch out over two years, with the ultimate punishment being expulsion from the IMF, credit default swaps on Greece could be triggered at once depending on how the International Swaps and Derivatives Association decides to rule.

“If on 1 July it’s not paid, it’s not paid," Lagarde said. Greece “will be in arrears, vis-a-vis the IMF. But I hope it’s not the case," she added. Bloomberg

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Published: 18 Jun 2015, 07:21 PM IST
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