Greece Third Bailout Proposal Rejected, IMF Default Approaches
- The Greek government proposed a two-year extension under Europe’s bailout fund, ESM
- The Eurozone rejected the proposal but will meet tomorrow to discuss Greece
- Greek banks’ ELA access from the ECB remains capped while country’s bailout program expires
Greece’s attempt for a last minute deal ended with a similar result as meetings from the previous five months. Eurozone finance ministers denied the Greek government’s request of a two-year bailout supposedly in exchange to turn the tide on Sunday’s proposed referendum. The sides will continue talking as another Eurozone teleconference is scheduled for tomorrow at 9:30GMT according to Eurogroup President, Jeroen Dijesselbloem
In the meantime, Greece’s bailout program will officially expire as of midnight June 30. Also, Greece will officially miss the consolidated International Monetary Fund payment due by Tuesday’s close. Greece owes €1.6 Billion to the IMF, a figure the country could only pay with additional funds from its creditors. Talks abruptly ended over the weekend but Greek Prime Minister, Alexis Tsipras, claimed Athens had never left the negotiation table.
The European Central Bank, which has been providing Greece with emergency liquidity through the country’s unfolding debt crisis, maintained its support today at €88.6 Billion according to member Ewald Nowotny. The ELA for Greek banks is a critical factor in the country’s market closures through July 7th. Greece is allowing citizens to withdraw €60 per day as capital controls are enforced through this period. The ECB is currently assessing risk to neighboring countries and will decide after the referendum whether ELA will continue to be extended assuming Greece stays in the Eurozone.
Despite the important expirations passing, a Greek labor minister urged signs of movement in Greek talks are “very positive.” Finland’s finance minister Alex Stubb confirmed the Eurozone stands ready to support Greece and a new aid program is possible if it commits to reforms.
According to Austrian, finance minister, Hans Joerg Schelling, attempts were being made early today to reach a last-minute agreement with Athens. Reports suggested Tsipras was considering the latest Eurozone proposals. German Chancellor, Angela Merkel, suggested nothing new was on the table and preemptively dampened expectations of a solution before the official Eurogroup transcript saying there were, “no concrete signs of a last minute deal with Greece.”
German Chancellor Merkel indicated that she is not ready to discuss an extension with Greece until after the July 5th referendum. Merkel represents the largest economy in the Eurozone and Germany is currently the largest creditor within the EU support network behind Greece.
Tomorrow’s meeting between the finance ministers of the Eurozone will provide more details on how the technicalities of a country in arrears (to the IMF), no longer backed by an official bailout program and facing a critical referendum to decide its negotiation position will operate moving forward.
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