Q: What will the IMF do?
A: A missed payment date starts the clock ticking. Two weeks after the initial due date and a cable from Washington urging immediate payment, the fund sends another cable stressing the “seriousness of the failure to meet obligations” and again urges prompt settlement. Two weeks after that, the managing director informs the Executive Board that an obligation is overdue. For Greece, that’s when the serious consequences kick in. These are known as cross-default and cross-acceleration.
Q: What are cross-default and cross-acceleration?
A: Failure to pay the IMF would entitle some of Greece’s other creditors, including the European bailout fund, to declare a default. They would then have the option to demand immediate repayment of all their loans, a process known as acceleration. Other lenders could then follow suit. While calling a default preserves creditors’ claims, acceleration — the bit that hurts — isn’t automatic. Each creditor decides on its own.