EU finance ministers reject Greek bailout extension

IMF Headquarters

June 27, 2015: After the Greek prime minister Alexis Tsipras broke off negotiations with creditors he called for a referendum for July 5 on the latest offer from creditors for an extended bailout program. Tsipras had asked that the present program be extended until after the vote on the referendum but Eurozone finance ministers rejected the Greek request.

The Greek government has opposed the offer as humiliating to Greece. The offer involves even more austerity conditions in return for further funds. Greek lawmakers are to vote this evening (Saturday) on whether to go forward with the referendum. The referendum decision has caused a run on cash machines as Greeks worry that banks might not even open on Monday and that capital controls might be imposed. Some still think that there could be a last ditch deal and that the referendum call was a negotiating gambit.

The head of the IMF has said that Greece will not even  be granted the usual 30 day grace period before a missed payment would be considered a default. If the IMF payment due on June 30 is missed, Greece will immediately be considered in default. Greece was hoping to reach a deal to release about $8 billion before that payment was due. The European Central Bank must decide if it will continue to prop up Greek banks as there are huge withdrawals. Some analysts are predicting that as early as money Greece might be forced to introduce capital controls and limit withdrawals.

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Greek finance minister Yanis Varoufakis

The eurogroup is said to be already focusing on Plan B, to deal with a possible Greek default and exit from the eurozone. Jeroen Dijsselbloem president of the eurogroup expressed surprise and disappointment at the sudden Greek decision and said it closed the door on future talks. German Finance Minister Wolfgang Schaeuble also claimed the call for a referendum meant that negotiations were over. The Greek debt crisis however has been far from predictable except for the fact that the Greek government has not been able to persuade the eurogroup and other creditors to pay any attention to its demands for relief from crushing austerity conditions. 

BBC News reports Greece timeline: Key dates ahead

• 27 June: Eurogroup refuses Greek request to extend existing bailout
• 30 June: Troika bailout programme ends as Greek €1.6bn payment to IMF due
• 1 July: No bailout programme could mean no emergency liquidity from the ECB
• 5 July: Proposed Greek referendum
• 10 July: Treasury bills worth €2bn to be repaid
• 20 July: Bonds worth €3.5bn to be repaid to eurozone partners
• 20 August: Bonds worth €3.2bn to be repaid

Additional Sources:
http://www.nytimes.com/2015/06/27/business/international/greek-debt-talks-enter-final-stages.html
http://rt.com/news/270169-eurogroup-plan-greece-default/
http://www.consilium.europa.eu/en/press/press-releases/2015/06/27-eurogroup-statement-greece/
http://www.nbcnews.com/news/world/greece-debt-crisis-lines-form-atms-pm-seeks-referendum-bailout-n383006

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