Skip to content
News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.



Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events


Economic Calendar

Economic Calendar Events

Free Trading Guides
Please try again
More View more
Greece Will Default on IMF Loan; Referendum Holds Fate on Eurozone Exit

Greece Will Default on IMF Loan; Referendum Holds Fate on Eurozone Exit

Yash Gandhi, Contributor

Talking Points

  • Greece did not accept its creditors proposals on Saturday and was unable to secure a deal
  • Prime Minister Tsipras calls a referendum for July 5th to determine Greece’s fate
  • EURUSD experiences volatility, and may continue to do so as the situation plays on

After engaging in negotiations with the European Central Bank, Eurozone, and International Monetary Fund (collectively known as The Institutions) over the last five months, Greece’s delegation left talks this past weekend. The break followed a rejected extension proposal put forward by Greek Finance Minister Yanis Varoufakis. Meanwhile, the Greek parliament voted on Prime Minister Alexis Tsipras’ proposed a referendum to secure popular support for their staunch negotiation position. The government won approval for the vote, which will be held on July 5th. This may vote may decide the fate of Greek’s future in the Eurozone.

Amid the turbulence surrounding a possible Greek exit, the S&P lowered Greece sovereign credit rating to a ‘CCC-’ from a ‘CCC’. They place the probability of a Greek exit at approximately 50% with the rating agency maintaining a ‘negative’ outlook.

As officials’ commentary filtered through in Athens and Brussels, lines to withdrawal cash from Greek bank accounts grew. Concern surrounding the Greek banking system intensified after the European Central Bank (ECB) throttled back on its emergency liquidity support for the country. According to the official ECB website, ELA for Greek banks will be capped at its current level. ECB President Mario Draghi said, “We continue to work closely with the Bank of Greece” to maintain financial stability.

Greece owes €1.6 Billion tomorrow (Tuesday) to the International Monetary Fund after the country bundled its June loans and agreed to pay an aggregate figure at the end of the month. Saturday’s meeting took place after Greece and its creditors could not reach an agreement over two previous Eurozone meetings and an additional discussion between Greek Prime Minister Alexis Tsipras and the head of the creditors. Reports from both meetings indicated progress was being made; however, the sides proved too far from a deal. One Eurozone official opined, “It’s ridiculous to block agreement for so little.”

Saturday brought more hope as the finance ministers from the Eurozone met for the third time in four days. Prior to the meeting Finland finance minister Alex Stubb said there is clear consensus inside the Eurozone, “an extension of the program is out of the question.” Greece finance minister Yanis Varoufakis requested an extension at the summit, which was promptly rejected by the finance ministers. At 15:00GMT the Greek delegation exited the summit. The other finance ministers remained in Brussels to continue discussions – ostensibly on what alternatives measures could be pursued. Varoufakis left the meeting by claiming the creditors’ proposals could not be accepted and a deal could still be reached Tuesday.

The remaining finance ministers ended their meeting three hours later. French finance minister Michel Sapin told reporters, “We want Greece to stay in the euro.” Details emerged of a phone call between Alexis Tsipras, German chancellor Angela Merkel and French president Francois Hollande. Merkel pointed out Greek citizens must choose between the euro and the original Greek currency, drachma. Tsipras rejected that notion.

Greek banks did not open today; an expected holiday after an agreement wasn’t in place. Prime Minister Alexis Tsipras announced capital controls would be in effect with Greeks restricted to withdrawing €60 per day. Banks in Greece will reopen on July 7th, two days after the referendum has been held.

In an effort to give the risks of the forthcoming vote greater heft, European Commission President Jean-Claude voiced a black and white warning on the July 5th referendum. He boiled the situation down to choosing between the euro and an exit. The next few days will carry critical weight for the debt-stricken country. The Eurozone faces its own crisis of confidence for the global community’s vantage. Angela Merkel summarized the current situation in a stark light by suggesting the euro “faces a decisive challenge”.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.