All sides are working hard to prevent Greece from defaulting on its debt obligations to the International Monetary Fund -- and with good reason: Such an outcome would have dire consequences not only for Greece and Europe but also for the international monetary system.
The IMF's "preferred creditor status" underpins its ability to lend to countries facing great difficulties (especially when all other creditors are either frozen or looking to get out). Yet that capacity to act as lender of last resort is now under unprecedented threat.
Preferred creditor status, though it isn't a formal legal concept, has translated into a general acceptance that the IMF gets paid before almost any other lender. And should debtors fail to meet payments, they can expect significant pressure from many of the fund's other 187 member countries. That's why instances of nations in arrears to the fund have been limited to fragile and failed states, particularly in Africa.
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