Greece likely to default on IMF debt
A demonstrator holds a banner during a rally organized by supporters of the YES vote for the upcoming referendum in front of the Greek Parliament in Athens, Tuesday, June 30, 2015. AP PHOTO/PETROS KARADJIAS
ATHENS—It’s crunch time for Greece, with the government unlikely to repay its 1.6-billion-euro ($1.87-billion) debt to the International Monetary Fund (IMF) due on Tuesday—a move that increases fears the country is heading to a messy default and potential exit from the euro currency.
Coupled with the expected loan default is the expiration on Tuesday of the country’s bailout program with European creditors—and with it any possible access to rescue loans that the government needs to pay its debts.
With banks shut and Greeks limited to cash withdrawals of 60 euros ($67) per day, long lines formed once more at automated teller machines (ATMs).
Capital controls began on Monday and will last at least a week, after a weekend bank run prompted by the prime minister’s call for a referendum on creditor demands in return for bailout loans.
Prime Minister Alexis Tsipras has argued that demands from international creditors for further, tougher austerity measures cannot be accepted after six years of recession.
European officials and Greek opposition parties have warned that a rejection of the creditor proposals in Sunday’s popular vote will lead Greece out of the eurozone and out of the European Union (EU) itself.
The Tsipras government has responded by saying this is scaremongering, and that a “no” vote will mean the country is in a better negotiating position.
But European Council President Donald Tusk has warned that will not be the case.
Markets shaken
The crisis has roiled global markets as investors fret over the repercussions of a Greek debt default and its exit from the euro—developments that could derail a fragile global economic recovery, as well as raise questions over the long-term viability of the euro currency itself.
European stock markets widened their losses on Tuesday as investors fretted the debt crisis in Greece could spread to other countries in the region. France’s CAC 40 dipped 0.9 percent in early trading, Germany’s DAX fell 0.8 percent and Britain’s FTSE 100 shed 0.6 percent.
On Monday, US stocks had their worst day of the year. The Standard & Poor’s 500 index dropped 2.1 percent, the Dow Jones industrial average lost 2 percent, and the Nasdaq composite fell 2.4 percent. The losses wiped out all the gains for the Dow and S&P 500 indexes this year.
US shares, however, were set to rebound moderately on Tuesday. Dow futures were up 0.2 percent and S&P 500 futures up 0.3 percent.
Asian stock markets bounced back on Tuesday, recouping some of the previous day’s sharp fall. In Asia, Japan’s benchmark Nikkei 225 gained 0.6 percent after dropping to its lowest point for the year on Monday. South Korea’s Kospi was up 0.7 percent, Hong Kong’s Hang Seng rose 1.1 percent, China’s Shanghai Composite jumped 5.5 percent, while Australia’s S&P/ASX 200 inched up 0.7 percent.
The euro dropped to $1.1161 on Tuesday from $1.1216 as investors dumped the EU’s currency and sought safer havens like the Swiss francs, Japanese yen and US dollar.
‘Last-minute offer’
In Brussels, EU officials said European Commission chief Jean-Claude Juncker was willing to help give Tsipras a belated way out of his financial crisis if he accepted creditors’ conditions on the bailout standoff and campaigns for staying in the euro.
An EU official, who asked not to be identified because of the sensitivity of the talks, called it “a sort of last-minute offer” before Tuesday’s dual deadlines.
Under the offer, Tsipras would need to write to Junker and other EU leaders saying he accepts the latest offer which was on the table last weekend. He would also have to change his position on Sunday’s referendum.
But there appeared to be scant desire to do that, with numerous officials from Tsipras’ radical left Syriza party arguing for a “no” vote on a series of television and radio appearances.
Tsipras himself was defiant in a television interview late on Monday, urging voters to reject creditors’ demands. More than 13,000 people gathered in Athens to support him and denounce Greece’s creditors, as they chanted: “Take the bailout and go!”
“We ask you to reject it with all the might of your soul, with the greatest margin possible,” Tsipras said on state television.
“The greater the participation and the rejection of this deal, the greater the possibility will be to restart the negotiations to set a course of logic and sustainability,” he added.
The scale of the economic pain inflicted upon Greece by years of recession and strict austerity was evident in official figures showing unemployment in the country stood at 25.6 percent in March.
Eurostat, the European Union’s statistics agency, also found that 49.7 percent of Greeks aged between 15 and 24 were unemployed.
Though both rates are down from the peaks they hit a couple of years back, they do still show the scale of the economic retreat in the country. The ranks of the unemployed were major supporters of Syriza in its election victory earlier this year.
A protest by supporters of a “yes” vote is planned for Tuesday night.
‘No’ won’t mean exit
The government insists that a “no” vote on Sunday will not mean an exit from the euro. Finance Minister Yanis Varoufakis went even further, threatening court action if attempts were made to remove the country from the joint currency.
“The Greek government will make use of all our legal rights,” Varoufakis told Britain’s Telegraph newspaper.
“We are taking advice and will certainly consider an injunction at the European Court of Justice. The EU treaties make no provision for euro exit and we refuse to accept it. Our membership is not negotiable,” he told the newspaper in comments released by the finance ministry.
On the streets of Athens, Greeks began adjusting to the new reality of restricted cash. Pensioners have been particularly hard hit by the capital controls, as many elderly Greeks do not have bank cards and so found themselves completely cut off from their money.
Banks swarmed
A day after worried elderly Greeks swarmed banks in the hope they would open, the finance ministry said on Tuesday morning it would open about 1,000 bank branches across the country for three days this week to allow pensioners without bank cards to make withdrawals.
But the limit for pensioners would be set at 120 euros for the whole week, rather than the 60 euros per day allowed for those with bank cards.
Earlier, irate depositors called in to television stations to report that some ATMs had run out of 20 euro notes, leaving them dispensing 50 euro notes only.
