Greek bailout: No extension, Yes renewal?

The Eurogroup has refused the Greek government’s request to extend the bailout programme, which expired at midnight on June 30th. By this time, Greece would have had to make a €1.6 billion payment to the International Monetary Fund in order to stay afloat. Since that hasn’t happened, Greece looks set to default on its debt and might end up leaving the Eurozone altogether.

Although the country is, for the moment, considered as being “in arrears” with the IMF rather than formally in default, the fact remains that, following the missed payment, there can be no more IMF lending and the country’s fiscal credentials are tarnished even further. This marks arguably the lowest point the country has seen since the onset of the debt crisis. For the first time since 2010, Greece is on its own, without a Eurozone, European Central Bank or IMF package. Greece has the dubious distinction of being the first developed country to have failed to repay its IMF loan.

But the International Monetary Fund isn’t the only creditor Greece stands at odds with. In light of Athens failing to accept the European Commission’s proposals for raising taxes and cutting welfare spending, Greece no longer has access to billions of euros in funds. Speaking on the request to extend the bailout programme even by a few days, to see the announced referendum through, Eurogroup chairman Jeroen Dijsselbloem said that it would be “crazy” to grant such an extension beyond the June 30 deadline.

The extension request having been rejected, Mr. Tsipras sent another proposal to Mr. Dijsselbloem on the eve of Greece’s default. The Greek Prime Minister asked for a “financial stability support in the form of a two-year loan” that would be “used exclusively to meet the debt service payment of Greece’s external and internal debt obligations.” Mr. Tsipras also requested that the Greek “EFSF debt be restructured and reproofed in the spirit of the proposals to be made by the European Commission in order to ensure that Greece’s debt becomes sustainable and viable over the long term.”

There were rumours that Greece could suspend its bailout referendum, set to take place on July 5th, if talks were to restart with European creditors on a new rescue programme. The Greek request was discussed at a Eurogroup teleconference in the evening of June 30th, with the discussion expected to continue into the morning of July 1st. Some European leaders fear that a Greek exit from the Eurozone will not only have economic consequences, as it could trigger a wave of defaults, but most importantly could unravel 60 years of European integration. The Greek bailout saga is definitely not over yet.

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