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Does Greece have the necessary funds to pay the IMF? And if it does, will it go far enough to pay wages and pensions in June? If it doesn't, is there an option to pay the fund later? What do the eurozone and the ECB think about it, and how would the daily life of Greeks be affected if their government chooses to pay the IMF first?

Ready cash in Greece is down to a critical low, and the country is increasingly likely to be unable to pay its dues to the IMF. As of today, the government has €300 million available to wire to the Fund on 5 June. But this does not apply to the contribution the government needs to make on 12 June, nor does for the disbursement of salaries and pensions at the month’s end. Actually, the government will be closer than ever to being unable to pay the IMF unless it musters an agreement with the Eurozone, which would unblock part of the country’s financing.

The process

The steps that follow a suspension of payments to the IMF are:

1. The Fund’s competent departments inform its CEO, Christine Lagarde.

2. Both departments and Lagarde start seeking contacts with the Greek government and its competent departments (each working at their own level), and as a result make it clear whether it's possible to pony up within 30 days. And Athens might solemnly pledge to the Fund that it will pay all June instalments (a total of 4, worth €1.6 billion between them) on 19 June or by the end of the month at the latest. But according to reports, this option has been unofficially rejected.

3. If the month ends without a payment, Lagarde will convene the Executive Board and the country will be put on "in arrears to the IMF" regime. The Fund has the right to skip the 30 days and choose a faster track for the process. Greece might be put on this regime even on the next day (June 6).

4. The Fund’s missions in Greece or Brussels will be terminated. For example, if there are ongoing negotiations between Athens and the creditors, then the IMF teams will be recalled.

5. The IMF will stop lending to Greece.

6. From that moment on, the pressure will escalate until Greece pays its instalments. The country will gradually lose its voting rights, its capital in the IMF, and will end up out of the fund. But this will need a long time to happen.

In practice

"If you miss a payment, you trigger events you cannot control," say those familiar with the Fund’s process. They point out that if the IMF officially announces Greece has defaulted on its debt, both the Eurogroup and the ECB Executive Board will hold an extraordinary meeting to assess the situation (there is a decision to do this on the very day when payments halt).

If Greece stops paying, this will trigger the so-called ‘cross default clauses’, which are provisioned with the loans received by Greece from the European Stability Mechanism (EFSF). This means that the EFSF can call in its debt amounting to €141.9 billion.

ECB President Mario Draghi

But this will not be the biggest problem because the government believes that the Eurozone won't take this step. Of crucial importance will be ECB's opinion on the issue of the liquidity it provides to Greek banks via ELA. If Greece ceases to be a solvent state, its banks will go down the same path, and many people in and outside government believe that this will be enough to stymie the liquidity coming through ELA. This will open the road for the imposition of capital controls on banks’ assets.

The uncertainty triggered by non-payment to the IMF will have a direct impact on the Greeks‘ everyday lives. Economic activity will freeze until concerns for the future among investors, households and businesses are alleviated.