Greece confirmed it would fail to make a key IMF repayment due yesterday, fanning fears of a chaotic eurozone exit on the same day the nation’s international bailout expires.
At the same time, the European Commission said it had offered an eleventh-hour deal to Greek Prime Minister Alexis Tsipras to stave off a crisis which could rupture the eurozone and risks a knock-on effect on other troubled nations.
Tsipras has urged Greeks to reject creditors’ tough reform demands in a referendum on Sunday, but has also pleaded for a bailout extension to keep Athens afloat.
Photo: Bloomberg
Failure to pay would see Greece become the first nation to default on the IMF since Zimbabwe in 2001. In terms of standards of living, it would be the wealthiest.
With just hours to go before the deadline, Greek Minister of Finance Yanis Varoufakis gave an emphatic “no” to questions over whether Greece would make the debt repayment of about 1.5 billion euros (US$1.7 billion) yesterday.
Europe’s main stock markets dropped on the news, though losses were less acute than on Monday.
Tsipras, elected on an anti-austerity ticket in January, on Monday blamed creditors for “suffocating” the banks and making it impossible for the nation to pay up its debt.
Thousands of people poured onto the streets of Greece’s two biggest cities, Athens and Thessaloniki, on Monday night to support their government’s opposition to the latest proposals, after a clash with creditors forced the closure of banks and the imposition of capital controls.
Greece’s international bailout program from its “troika” of lenders — the EU, the European Central Bank and the IMF — also expired yesterday.
Talks between Greece’s leftist government and its creditors fell apart after Tsipras called a referendum on the latest proposals.
Tsipras on Monday sought to calm nerves by leaving the door open, saying Sunday’s plebiscite on the creditors’ latest cash-for-reform plans would leave Greece “better armed” in the fight for a debt deal.
European Commission chief Jean-Claude Juncker set out a possible “last-minute” solution for an accord before the referendum, a commission source said.
A euro-MP from Tsipras’s hard-left SYRIZA party said the plan should be studied.
Juncker told the Greek prime minister that a deal would involve accepting reform proposals that Greece’s EU-IMF creditors made at the weekend and backing a “Yes” vote in Sunday’s plebiscite.
A Greek government source said that negotiations were taking place between Athens and its creditors, though a European Commission spokesman said time was “running out quickly.”
However, German Chancellor Angela Merkel said she knew nothing about a new offer from Juncker.
EU leaders, including Merkel, French President Francois Hollande and Italian Prime Minister Matteo Renzi have joined Juncker in warning that the referendum would effectively be a vote on Greece’s place in the eurozone.
The government has called for Greeks to vote “No,” rejecting the creditors’ debt proposals.
Spanish Prime Minister Mariano Rajoy yesterday said that a “Yes” victory in the referendum would allow Greece’s creditors to negotiate with a new government.
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