Greece seeks new EU loans after IMF debt default

July 1, 2015


Pro-euro protesters demonstrate in front of the parliament building in Athens on June 30, 2015/AFP
Pro-euro protesters demonstrate in front of the parliament building in Athens on June 30, 2015/AFP
BRUSSELS, Belgium, Jul 1 – Greece lurched deeper into crisis Wednesday as European finance ministers prepared to consider a request for new loans in a last-ditch effort to keep the country in the eurozone after it defaulted on a key payment and a bailout keeping its economy afloat expired.

Cash-strapped Greece became the first developed country to default on the International Monetary Fund after missing a 1.5 billion euro ($1.7 billion) payment on Tuesday, as efforts to find a compromise with its EU lenders came to naught.

The missed payment underscored the failure of more than five months of wrangling between Greece’s left-wing government and its creditors to reshape the country’s bailout and prevent it dropping out of the eurozone.

But talks were set to resume on Wednesday after Athens asked for a new two-year aid plan – the third in five years – as ratings agencies cut their ratings on Greece’s debt, predicting it will return to recession this year.

Athens is asking for a further 29.1 billion euros from the European Stability Mechanism (ESM), to “fully cover its financing needs and the simultaneous restructuring of debt,” for the next two years, according to the prime minister’s office.

Greek officials indicated they would be willing to suspend a referendum planned for Sunday on the reforms demanded by its creditors if Wednesday’s eurozone talks in Brussels yield agreement on the new funding request.

“There was a willingness to take a look at the question in the referendum or update the referendum or suspend it,” an EU source told AFP after talks between Greek Finance Minister Yanis Varoufakis and his eurozone counterparts.

“All that depended on the signal the Eurogroup would give to this new proposal.”

Greece has entered uncharted waters without international aid for the first time in five years, sparking fears of a chaotic eurozone exit which could have untold repercussions for global markets and the EU.

The ongoing uncertainty hit European stocks and the single currency on Tuesday. In Asian trade on Wednesday, the euro treaded water, buying $1.1140 compared to $1.1139 in New York late Tuesday.

On the streets of Athens, some 20,000 people turned out to show their support for a bailout deal after banks were closed this week amid the spiralling debt crisis, forcing people to queue for hours for cash.

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