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NY Times, June 30 2015
Greece Misses Debt Payment, Deepening a Crisis
By JIM YARDLEY and JAMES KANTER
ATHENS — The International Monetary Fund said shortly after midnight
Wednesday that Greece had missed a crucial debt payment to the fund.
“We have informed our executive board that Greece is now in arrears and
can only receive I.M.F. financing once the arrears are cleared,” said
Gerry Rice, a spokesman for the fund.
Greece is not technically in default, but missing the payment is yet
another an unmistakable warning that the country will probably be unable
to meet its other obligations in coming weeks, to its bond holders and
to the European Central Bank. That may might make the European Central
Bank, one of its principal creditors, less willing to continue emergency
loans that have been propping up Greek banks for the past several months.
By declaring Greece in arrears, the I.M.F. avoided using the term
“default.” Credit rating agencies also will not consider Greece to be in
default based on missing the I.M.F. payment, for the technical reason
that the I.M.F. is not considered a commercial borrower.
The weak link in the 19-nation eurozone is struggling to tame its debt.
On Tuesday, Greece missed an important payment to the International
Monetary Fund.
But the ratings agency Standard & Poor’s said in a statement Tuesday
that it would designate Greece as being in default if the country cannot
make payments to private creditors, like €2 billion in Greek Treasury
bills that are due on July 10.With just hours to go before the deadline
for the payment, Prime Minister Alexis Tsipras had asked the other
nations that use the euro to provide another bailout that would buy
Athens time to renegotiate its crippling debt load.
Finance ministers of the eurozone countries discussed the proposal on
Tuesday night and left open the possibility that Greece could eventually
win a new aid package, but dashed any hopes Athens had for immediate
action. Chancellor Angela Merkel of Germany had said earlier in the day
that no deal with Mr. Tsipras’s government could be negotiated until
after a referendum on Sunday in which Greeks will be asked to accept or
reject an offer made last week by Greece’s creditors.
Mr. Rice confirmed that the I.M.F. had received a request on Tuesday
from the Greek authorities for an extension on the repayment.
That request, he said, “will go to the I.M.F.’s Executive Board in due
course.”
Jeroen Dijsselbloem, the head of the Eurogroup of finance ministers,
also said on Tuesday night that Greece was effectively in default and
could now face even tougher conditions for a new aid package.
Mr. Dijsselbloem was speaking to CNBC shortly before midnight Central
European Time when Greece formally missed a payment due the
International Monetary Fund, and the European part of the country’s
current bailout program expired. During a conference call earlier in the
evening, the Eurogroup ministers refused a last-minute bid by Mr.
Tsipras to extend that program.
“I think the fact of the matter is that Greece is in default or will be
in default tomorrow morning on the I.M.F. and also, I believe, on a loan
to their own central bank,” Mr. Dijsselbloem told CNBC. “But they will
be in default, and I don’t think can alter that in the short term.”
Any new program for Greece from the European bailout fund, the European
Stability Mechanism — something that was requested by Mr. Tsipras on
Tuesday — would require a number of procedural steps and raise
significant new challenges for Greece.
“Any talks about a future program will have to be discussed in the
Eurogroup" and "will have to be assessed by the institutions,” Mr.
Dijsselbloem said.
He was referring to the three institutions — the European Commission,
the International Monetary Fund and the European Central Bank — that
oversee Greece’s compliance with the terms of the two giant bailouts it
has been granted since 2010.
Earlier, Alexander Stubb, the Finnish finance minister, wrote on his
Twitter account that extending Greece’s current bailout program had not
been possible. But Mr. Stubb said the request for what amounts to a
third bailout for Greece would be “dealt with through normal
procedures,” as was “always” the case after such requests.
The developments came after top European Union officials had outlined
another offer to Mr. Tsipras on Monday night, and suggested that both
sides were interested in defusing a crisis that has left Greece
financially crippled and at risk of becoming the first nation to leave
the euro currency union. France and the United States, among other
nations, have been pressing for a compromise that could avert any risk
of Greece’s problems spreading to other countries and reduce the strain
on European unity.
With the nation’s banks shut down and his government confronting
intensifying financial strains, Mr. Tsipras’s office released a
statement Tuesday afternoon confirming that the government had proposed
a new bailout from a different pot of money than the one drawn on so far.
The statement was vague, noting that Greece had applied for a two-year
agreement for new loans from the so-called European Stability Mechanism.
The statement said that the aim was to help the country meet its debt
obligations and that Greece’s intention was to remain in the eurozone.
The lack of specificity in the statement made it unclear whether it was
just a repackaging of previous requests — already rejected in Brussels,
the base of the European Union — or if the prime minister had offered
new proposals.
Hours earlier, Mr. Tsipras spoke by telephone with Jean-Claude Juncker,
president of the European Commission, Mario Draghi, chief of the
European Central Bank, and Martin Schulz, president of the European
Parliament. And within the Greek government, competing voices were
debating how to proceed, analysts said.
From a small island to the capital in Athens, here is a glimpse into
some of the lives of Greeks as their country struggles to repay billions
in debt.
“What is certain is that there is a lot of pressure inside the
government,” said George Pagoulatos, a political analyst in Athens.
“There are some people there who realize the huge risks in the path the
country is on.”
Tuesday was the final day in which Greece could have made a debt payment
of 1.6 billion euros, or about $1.78 billion, to the I.M.F. Failure to
make the payment puts Greece in arrears to the I.M.F., but also casts
further doubt on its willingness and ability to meet other financial
obligations in the coming weeks. Greece’s broader European bailout
program, the lifeline that has helped keep the country afloat, also
expired at midnight in Brussels. With its banking system shut down,
Greece could be forced to abandon the euro as its currency if no deal
can be reached for additional financing.
Negotiations have been going on for months, as Greece has sought to
unlock a frozen €7.2 billion bailout payment and complete a new
comprehensive agreement that would include more funding and major debt
relief. But the talks broke down last weekend, after Mr. Tsipras
unexpectedly announced that a “yes or no” national referendum would be
held so that voters could decide whether to accept the terms proposed by
creditors, which he found onerous.
Mr. Tsipras has called on voters to choose “no” and has denied that the
referendum is the equivalent of choosing whether to leave Europe’s
currency union, something that most Greeks do not want to do.
“From the first moment, we had made it clear that the decision to carry
out a referendum is not the end but the continuation of negotiations,
with a better outcome for the Greek people,” the statement released by
Mr. Tsipras’s office said. “Greece remains at the negotiating table.”
Pro-Europe demonstrators massed in Syntagma Square in Athens outside
Parliament on Tuesday night despite drizzle, thunder and lightning. As
speakers began shouting, “Vote yes to Europe,” the demonstrators shouted
and blew whistles. Some waved Greek flags, others red flags bearing the
words “YES to Europe. YES to the Euro.”
Alexandros Limniatis, 67, a retired worker from the telephone company
OTE, said he had been frustrated with the governing Syriza party since
it took office this year. But the last straw, he said, came on Monday,
the first day of capital controls, when he found himself waiting in a
long A.T.M. line to receive his daily cash allotment of €60.
“I went home to my grandchildren and I thought, ‘What Greece am I
leaving them?’ ” he said, twisting the strand of worry beads he had
taken up since the doctor told him to quit smoking. “So I made up my
mind to come here to demand hope. Greece in Europe. A European Greece.”
Initially, European officials were furious about Mr. Tsipras’s decision
to call a referendum, interpreting the move as brinkmanship in the
negotiations. But on Monday, several European leaders, notably Mr.
Juncker, began openly lobbying Greek voters to choose “yes.”
Some analysts said European officials were hoping that a “yes” vote on
Sunday would force Mr. Tsipras to resign, a development that would be
welcome to the creditors — the European nations that use the euro, the
European Central Bank and the I.M.F. — after months of bitter clashes
with Greek government officials. In the meantime, some European
officials have been signaling that they would like to use the coming
days to try to persuade Mr. Tsipras to stop pushing for a “no” vote — an
unlikely prospect given the consistent position Mr. Tsipras has taken
against the terms offered so far by the creditors.
Jim Yardley reported from Athens and James Kanter from Brussels. Melissa
Eddy and Alison Smale contributed reporting from Berlin, Niki
Kitsantonis, Dimitris Bounias and Anemona Hartocollis from Athens and
Alissa J. Rubin from Paris.
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