Greece: Risk of Missing Debt Payment

Published on March 25, 2015
SGH Insight
"We believe there is a reasonable likelihood Greece’s payment to the IMF may be missed and delayed by a week or two as Athens scrambles to put together a budget acceptable to its creditors."
Market Validation
(Bloomberg 04/01/15) "June bund future climbs as much as 45 ticks to 159.21, contract peak, after Spiegel reports that Greece doesn’t want to respect IMF April 9 repayment deadline."

Wire services may have generated some confusion this morning in running with a headline reporting Germany’s Finance Ministry spokesperson Martin Jaeger assured Greece the 1.2 billion euros it has requested the EFSF return to the HFSF would “still be available for Greek bank recap.”

What Jaeger actually meant was that it was indeed available for bank recap needs, just as the entire 10.9 billion euros the HFSF was forced to return to the EFSF is available if need be. What the Euro Working Group and EFSF are not willing to do is give control of any of that money back to Athens for the government to use instead to close budget shortfalls (see SGH 3/24/15, “Greece: Scraping for Funds”).

This, in conjunction with the decision by the ECB Governing Council to enforce the Single Supervisory Mechanism recommendation barring Greek banks from increasing the size of their Greek t-bill holdings, only reinforces the willingness of EU officials to play hardball with Athens–if and until they deliver a credible budget that can then be used as a basis for the release of tranches from the remaining 7.2 billion euros left in the existing program.

EU officials are well aware that the cash squeeze may compromise the ability of Athens to meet some of its upcoming debt obligations and are studying the terms of Greece’s agreement with the IMF to determine if a missed payment on the 450 million euros due on April 9 would trigger cross default provisions.

Our understanding is that it may not, and we believe there is a reasonable likelihood Greece’s payment to the IMF may be missed and delayed by a week or two as Athens scrambles to put together a budget acceptable to its creditors.

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