Greece has become the first developed economy to default to the IMF after missing a $1.7 billion payment.
The International Monetary Fund has an official step-by-step procedure to be followed if a country falls into arrears:
- Immediately, a cable is sent asking for payment and Greece is cut off from further Fund borrowing.
- After two weeks, the IMF sends a message to Greece stressing the seriousness of the failure to meet obligations and urging full and prompt settlement.
- After one month, Lagarde notifies her executive board that an obligation is overdue. This is the step that Lagarde says she’ll jump to immediately.
- Lagarde notifies Greece that unless the overdue obligations are settled promptly, a complaint is issued to the executive board.
- A complaint regarding Greece’s overdue obligations is issued.
- After three months, a brief factual statement noting the existence and amount of arrears is posted on the Fund’s external website. Access to Special Drawing Rights, the IMF’s reserve asset, is limited.
- For six to 12 months, the Fund re-examines access to SDRs.
- Up to 15 months, technical assistance can be suspended due to non-cooperation.
- Up to 18 months, a decision on suspension of voting and representation rights is considered.
- Up to 24 months, steps to remove the country from the IMF are initiated within six months after the decision on suspension.
Thousands of Greeks took to the streets this week holding up banners saying: “Our lives do not belong to the creditors!”
On Sunday, Greece will have a referendum on whether or not the county stays or leaves the Eurozone.
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