That’s the date when it must return €3.5bn to the European Central Bank. And writing in the FT this morning, Peter Spiegel explains that officials fear serious trouble if the payment is missed:
Officials are hoping to reach an agreement by next week’s meeting of eurozone finance ministers to ensure the €7.2bn tranche can be disbursed before a €3.5bn Greek government bond comes due on July 20.
Eurozone officials believe it will take a month for Greece to legislate and implement the reform programme, and a default on the July 20 bond, held by the European Central Bank, could spark financial chaos in the country, officials believe.
Although Greece’s current bailout ends at the end of the month, a deal reached by next week could include a programme extension so that bailout tranches could be paid into July.
Moritz Kraemer, chief rating officer of Standard & Poor’s, has also identified the €3.5bn ECB repayment on July 20 as the key date for Greece and its creditors.
Last night, Standard & Poor’s cut Greece’s credit rating by one notch to CCC, just two places above default, and warned that the country’s liquidity position continues to deteriorate.
Speaking on Bloomberg TV a few minute ago, Kraemer said thatGreece wouldn’t officially default if it failed to repay the International Monetary Fund on June 30, as the IMF isn’t a commercial creditor.
However, failing to repay the European Central Bank would have very serious consequences..
The real deadline is in July when Greece must repay the money it owes to the ECB.
If they miss that payment, my expectation is it would be impossible for the ECB to continue providing emergency liquidity to the Greek banking sector.
Yesterday, the ECB agreed to provide another €2.3bn of liquidity to Greece’s banks, to help them stay afloat.
But, Kraemer argues, the ECB might be forced to reassess the situation if it doesn’t get its own money back:
If you subtract all the Greek government debt that Greek banks hold, their solvency is questionable.
