What will happen if Greece defaults on its loan repayment to the IMF?

Sarah Spickernell
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Greece's position in Europe is on the rocks (Source: Getty)

Over the course of June, Greece must make four payments totalling €1.6bn (£1.1bn) to the IMF, starting with €300m (£212m) on 5 June.

But whether it will meet all these obligations is far from certain, as the country is struggling to reach a deal with its European creditors to unlock crucial bailout funds. It managed it last time, paying €750m (£531m) over to the IMF on 11 May, but its sources of money are quickly drying up and it desperately needs aid to continue with its payments.
Greek officials have threatened to default a number of times, arguing that there is no cash left to give, but many creditors have dismissed this as a negotiating strategy to get them to release aid more quickly.
With all the repayments coming up in the next few weeks and no clear solution in view, what will happen if Greece doesn't quite manage it?

Grace period

Not meeting the repayment deadline wouldn't send Greece into an immediate state of turmoil. Under IMF rules, a 30 day “grace period” would be offered to Greece, during which it would be asked to pay back the money as soon as possible.
During this time, it is considered likely that Greece would manage to gather the necessary cash, since creditors and markets would be scared by the initial miss.

Arrears process

If Greece doesn't meet the grace period deadline and defaults, Christine Lagarde will notify her executive board at the IMF, and an arrears process will be triggered.
The exact details of how this would be carried out are not yet clear, but such a default is likely to have a negative impact on help given by the European Commission and European Central Bank – Greece's two other creditors.

Syriza in trouble

If Greece's left-wing government is unable to secure a deal that releases its remaining bailout money, the opposition may well insist on new elections as the country heads for an exit from the euro.
Alexis Tsipras, Greece's Prime Minister, could have no choice but to go along with this or offer a referendum on the Euro, and the evidence points towards widespread support for remaining in the currency.

ECB changes its ways

If Greece defaults, the European Central Bank's activities in the lead up to the event are likely to be scrutinised. It may have no choice but to bring an end to the emergency assistance it has been providing in large sums since the start of the year, putting Greece in an even worse mess.

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