Send lawyers and money

ReutersGreece admitted on Wednesday it will struggle to make debt repayments to the IMF and the European Central Bank this year as Germany’s finance minister voiced open doubts about Athens’ trustworthiness. A day after euro zone finance ministers agreed to a four-month extension of a financial rescue for the currency bloc’s most heavily indebted member, Finance Minister Yanis Varoufakis gave a frank assessment of Greece’s financial position.

“We will not have liquidity problems for the public sector. But we will definitely have problems in making debt payments to the IMF now and to the ECB in July,” he told Alpha Radio.

He put no figure on the funding gap. After interest payments this month of about 2 billion euros, Athens must repay an IMF loan of around 1.6 billion that matures in March and about 7.5 billion for maturing bonds held by the ECB in July and August.

German Finance Minister Wolfgang Schaeuble, revelling in his role as the euro zone’s grumpy paymaster, said no further aid would be paid out until Greece fulfilled the conditions of its bailout programme.

This situation is bringing a major — and strangely under-remarked upon — issue to the foreground.

Greece has 3 creditors: the ECB, the IMF, and the EU institutions. Their respective loans are being delivered through different instruments and being serviced on different timetables. In other words, for all practical purposes, they are different classes of creditor. If this was a private sector debt renegotiation, it is highly unlikely that lawyers or judges would think it’s a good idea for everyone to be in the room at the same time negotiating, as their interests are different. So how is it magically the case that there’s no conflict of interest between the creditors in this case, that Christine Lagarde is sitting in on the Eurogroup discussions about Greece? Shorter-term creditors generally like to get out while they can, and not be chained to the longer-term financiers.

Photo: Audiovisual Service, European Council.

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