Third time lucky?

By P.W.

BY ANY reckoning today is a crucial moment in the extraordinary Greek debt-crisis drama. With multiple deadlines looming, Alexis Tsipras, the Greek prime minister, seems to be seeking a way out of the mess he created on Friday, when he announced his intention to put Europe's latest offer to a referendum vote. With its current bail-out programme—the second Greece has received—scheduled to expire at midnight in Brussels, Mr Tsipras has officially asked for a third rescue package, which would cover Greece's financing needs for the next two years and include new debt restructuring. Yet time is quickly running out to conclude a new deal.

As things stand at least one critical deadline will be flubbed. The Greek government—which is as strapped for cash as its citizens (who can only withdraw €60 a day from ATMs)—does not have the money to pay the IMF the €1.5 billion ($1.7 billion) that is due this evening. Yanis Varoufakis, Greece's finance minister, confirmed on June 30th that Greece will not make the payment. Greece will therefore suffer the ignominy of becoming the first advanced country to default to the IMF, joining the likes of Sudan and Zimbabwe in that hall of shame. Technically it will go into arrears but Christine Lagarde, the head of the IMF, has said there will be no grace period. In short, it will amount to a default (even if the IMF prefers to call it something else).

Although this will be an abject moment even in Greece’s chequered financial history as a serial defaulter (for over half of its existence since becoming an independent state in 1830 it has been in default, with the British most memorably sending the Royal Navy to seize marine assets in 1850 to pay off the country's debts) it will matter more symbolically than practically. Credit-rating agencies have indicated that a missed payment to an official creditor like the IMF will not trigger "cross-default" clauses in privately-held debt contracts allowing bondholders to demand their money back. And although the European Financial Stability Facility, the main vehicle used by euro-zone states to lend to Greece, does have such clauses, it has indicated that it will not exercise this right.

The much bigger question is whether Mr Tsipras will take advantage of a last-last-minute offer by Jean-Claude Juncker, the president of the European Commission, to pull back from the precipice. On June 29th Mr Juncker mooted the possibility of a new deal, and new debt restructuring, provided that Mr Tsipras campaigned for a "yes" vote in the referendum scheduled for July 5th (which is increasingly being cast by euro-zone officials as a vote on whether or not to drop the single currency). Eurogroup finance ministers will reportedly meet in a teleconference this evening to discuss Mr Tsipras's proposal.

Odds are low that any new deal will be agreed in time to salvage the IMF payment. Yet it is possible that a new agreement could be reached by July 20th, when Greece is scheduled to repay the ECB €3.5 billion. Defaulting on the ECB would mean an almost certain exit from the euro area. Whether Greek banks will be able to last that long without any additional emergency support from the ECB (which capped its emergency lending programme to Greece over the weekend) is an open question.

Time is not on Greece's side. Neither has the government yet signalled a willingness to change its position on the referendum; earlier on June 30th Mr Tsipras was sticking to the line that he would be campaigning against the proposals. But the effects of Mr Tsipras’s foolish call for a vote have almost certainly been far more calamitous than he anticipated (though they were quite predictable according to economists). Moreover, indications from polls suggest that the Greeks will vote in favour of the proposals and thus against their government on Sunday.

Such has been his pattern of reckless behaviour that few would put much money on Mr Tsipras stepping back from the brink. He has after all made much of the humiliation of the creditors’ offer, so that it would be humiliating for him to concede now. But that may only postpone the humiliation of having to stand down until after the referendum—if it goes against him. It is not now clear (and it may never be) whether Mr Tsipras is truly interested in calming the furore he has unleashed or merely working to deflect as much blame as possible from himself in the event Greece does stumble out of the euro area.