Greece is hurtling towards default and a possible euro exit after Europe responded to the leftist government’s announcement of a surprise referendum by refusing to extend Athens’s desperately needed bailout.
In Brussels, Greek finance minister Yanis Varoufakis had asked eurozone colleagues to stretch the aid plan for a few days past its June 30 expiry date and until after the July 5 referendum vote on a creditor reform plan, but they unanimously rejected his appeal.
The move leaves debt-laden Athens struggling to meet a crucial 1.5 billion euro IMF debt payment on Tuesday, putting Greece’s place in the single currency at risk and threatening the entire post-war European project.
“The Greek government has broken off the process, has rejected the reform proposal and is now putting the question in a negative way to the Greek people, which is an unfair way of putting the question,” Eurogroup president Jeroen Dijsselbloem told a press conference.
“Given that situation, I think we might conclude that however regretful, the program will expire Tuesday night,” the Dutch minister said.
Underscoring Greece’s perilous position in the currency union, Mr Dijsselbloem said the other 18 eurozone finance ministers would now hold fresh talks without Greece present to discuss the “consequences” and “prepare for what’s needed to ensure the stability of eurozone remains at its high level.”
A Eurogroup statement issued after the meeting said it was “supported by all members … except the Greek member.”
Eurozone will fight danger of contagion: Germany
The eurozone will do all it can to fight the risk of financial contagion from Greece after its creditors refused to extend its bailout, German finance minister Wolfgang Schaeuble has said.
“We will do everything to fight against any possible danger of contagion,” Mr Schaeuble said after eurozone finance ministers met without their Greek counterpart for emergency talks in Brussels.
Greece will “enter acute difficulties in the coming days,” he said, referring to scenes of Greeks lining up to cash machines to withdraw their deposits.
However the pro-austerity Mr Schaeuble said that despite the failed talks and looming default, Greece was a full member of the single currency zone.
“Greece remains a member of the eurozone and Greece remains part of Europe,” he said.
Other ministers said risks for contagion were lower since the worst days of the crisis, but that outside of a bailout program, Greece would require special attention.
“Step one is to try to help Greece in many different ways. We understand what difficulties Greeks will have to go through,” Finnish finance minister Alexander Stubb said.
Greece fears ‘permanent’ damage
The Greek parliament will vote on whether to go ahead with the referendum at midnight (local time), after an address by prime minister Alexis Tsipras.
The outspoken Mr Varoufakis warned that the decision could permanently damage the single currency, formed in a bid to bring unity to a once fragmented continent.
“The refusal of the Eurogroup today to endorse our request for an extension of this agreement for a few days or a couple of weeks … will certainly damage the credibility for the Eurogroup as a democratic union and I am very much afraid the damage will be permanent,” Mr Varoufakis said.
But he said he was “still fighting” for a deal, and insisted the radical Syriza government would “honour the verdict of the Greek people” in the referendum.
Greece’s negotiations with its international creditors have dragged on since January, when Mr Tsipras’s Syriza party first took power.
It won on a promise to end austerity after two EU-IMF bailout programs since 2010, worth 240 billion euros.
Syriza has repeatedly refused to make cuts to pensions and changes to the VAT system demanded by Greece’s bailout monitors: the European Commission, European Central Bank and International Monetary Fund.
A week of intensive talks in Brussels ended with Greece’s creditors on Friday offering Athens a five-month, 12-billion-euro ($13.4-billion) extension of its rescue program, on the condition it committed to fresh reforms.
Mr Schaeuble said the Greek government had “ended the negotiations unilaterally” and rejected that offer.
Long lines of people have queued at cash machines in Greece after the referendum announcement by Mr Tsipras, amid fears of a bank run and possible capital controls.
The European Central Bank will now play a crucial role in ensuring Greece’s banks have the cash to open on Monday, and two top Tsipras aides were meeting ECB head Mario Draghi in Brussels on Saturday.
The governing council of the ECB was also reported to be meeting on Sunday, and was “closely monitoring developments”, the bank said.
Mr Draghi has been keeping the Greek banking system alive with near-daily cash infusions as it is frozen out of the capital markets.
The Eurogroup will now discuss worst case scenarios, ranging from a Greek default next week to a possible exit from the eurozone and even, as suggested by the Greek central bank, the 28-nation European Union.
source:abc.com
STUDIO 3 NEWCASTLE AUSTRALIA 