Wednesday, July 1, 2015

The IMF does not landing location Greece. The ECB can do – Banker

Up to 30 June 2015. Greece had to pay
 installment debt to the IMF. Of course she did not, and – as it turns out – for now, it does not meet any “unpleasantness” from the Fund. Much c
ięższa
 Athens awaits passage in connection with a debt owed to the ECB.

 

By refusing
 discharge of an obligation to the Fund, the Greeks launched a written-many
 steps procedure. Sanctions imposed by the IMF, not to mention the exclusion of
 the country with the Fund are not because neither automatic nor immediate. Indeed, in the current situation Greece can not count on financial assistance from the IMF, but Athens had long been aware of this.

 

Here’s the next move described by the IMF procedure:

 

What awaits
 Greece from the IMF?

 

  • Immediately – IMF sends a reminder to the country which is in arrears with
     payment. This communication is carried out by the office of the competent director
     executive. Access member of the IMF funds will be suspended.

  •  
  • 2 weeks -
     the board sends the governor representing the country (in the case of Greece is
     This Minister of Finance) communication in which it highlights the seriousness of the situation and urges
     to fully and promptly settle the obligation.
  •  

  • 1 month – Director
     IMF Managing notify the board of the Fund of arrears and shows the level of
     obligations and steps have been taken to protect
     payment.
  •  

  • 6 weeks -
     managing director shall notify the country concerned that if the payment is not covered
     will be regulated, the complaint will be addressed to the board.
  •  

  • 2 months – Director
     Managing directs the complaint to the board.
  •  

  • 3 months -
     management vigilant complaint. Typically, in such a situation the Board
     decides to limit a country access to the resources of the IMF and the right to
     the use of special drawing rights (SDRs).
  •  

  • 6-12 months
     - The Board shall review its decision. Depending on the efforts made
     by country, the board may suspend cooperation with the country. In this case
     all governors are informed IMF that the country still does not repay
     its obligations to the Fund, which is read as a declaration of absence
     agreement.
  •  

  • Up to 15
     months – can be suspended technical assistance to a country unless
     that the board determines otherwise.
  •  

  • Up to 18
     months – can be suspended voting rights and representation of the country in the IMF.
  •  

  • Up to 24
     months – expulsion procedure is initiated with the IMF.
  •  




It is worth
 noting that a default installment of the debt owed to the institution that is the IMF is not
 treated synonymously with, eg. not have a TV bonds
. Not without reason
 Fund scrolls documents in this context the term “backlog”, and
 no “bankruptcy”. This view there are three major rating agencies, according to
 the lack of which the installment repayment debt to the institution does not constitute an event after
 which you declare bankruptcy.

 

Of course, the lack of
 the installment repayment of debt to the IMF puts Greece in the infamous
 Among the countries that have problems with payment of liabilities to the Fund
 (Zimbabwe, Somalia, Sudan). Further deterioration of the zszarganego in
 recent years the image of the country in the eyes of investors seems now, however, the smallest
 Athens concern. Sustainable return to the global debt market Greece and so at the moment can not plan ahead, and the first bonds from private investors must buy only for two years.


 
 

Since no repayment
 installment debt to the IMF did not meant that Greece “sky fell on my head” on
 They come to the fore other obligation. The new cut-off date, which
 commonly said to be already in the financial markets is 20 July . Until that date, Greece
 It has to repay the installment of the European Central Bank (3.46 billion euros). For this installment important
 is not so much its size (Athens probably would not have and will not have so many holidays
 funds), but the same creditor.


 

The IMF is
 global institution, in which the main role is played by the United States and
 which – as shown in the above table – nor demands money immediately,
 nor can it impose severe penalties on Greece. Debt held by euro zone
 that while the “family debt”, which – as you know – the best comes out
 the photos.


 

If Greece
 does not repay the installments to the ECB, the losses caused in this way will be covered
 They had to be by other members of the ECB. But more importantly – the Greek banks,
 which in recent weeks they flowed billions more euros, maintained
 They are alive only thanks to the “drip” in the form of funding from ELA program,
 at the start and each time increasing his consent limits have
 express ECB.


 

Currently, the ECB has agreed to grant the Greek banks 89 billion from the ELA program. This amount is awarded in the form of revolving loans to banks. With this program can not be used unconditionally – the ECB’s internal regulations say that the support may be granted only to solvent banks that provide adequate protection (called. Collateral). Everything therefore depends on whether the ECB considers that the Greek banks are able to stay afloat and that presented by collateral (including, eg. Greek government bonds) meet the requirements of “quality”.


 

 

 


 

Although
 the last weeks leading actors show Fri. “Grexit” not once Surprised
 audience, failure to repay debt owed to the ECB and the continued use of the program
 launched an aid agreement with the ECB seems to be something quite impossible . Lack
 unlimited possibilities for creating new euro by the Bank of Greece would in
 such a situation lead either to bankruptcy or the Greek banking sector
 the total rebellion of Athens and abandon the common currency in favor of the drachma.


 

Of course,
 still it can not be excluded that after Sunday’s referendum, however, agreements Greece
 your creditors, obtain additional resources and to repay installment of the IMF before the fund
 barely has time to come to the second step in their procedure. But for clock
 countdown to Grexitu should be switched on 20 July
and rearm
 be patient.


 

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Michael Żuławiński

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