Greece Fails To Meet IMF Debt Deadline
Greece failed to meet its deadline to pay 1.6 billion euros it owed to the International Monetary Fund on Tuesday, a development that heightened fears of a Greek exit from the eurozone. It is the first time a developed country misses a payment to the IMF.
Tuesday also marked the end of Greece's years-long bailout program.
Greek Prime Minister Alexis Tsipras had launched a last-minute overture to creditors on Tuesday after talks on a new bailout deal for the country had taken a dire turn during the weekend. Tsipras proposed a two-year deal that would include financial support and debt restructuring. However the offer was quickly rebuffed by the other parties.
German Chancellor Angela Merkel stood firm on Tuesday and ruled out negotiations with the Greek government until Greeks head to the polls to vote on the bailout proposal in a referendum scheduled for Sunday.
Greece was plunged into economic turmoil amid the global financial crisis, when the nation's sizable budget deficit and its years of accumulated debt led to its credit ratings being downgraded in December 2009. The Greek government accepted a multibillion-dollar bailout deal from the IMF, the European Central Bank and the European Commission in 2010, followed by another in 2012, in order to stave off bankruptcy.
In exchange for these bailouts, Greece was required to make a number of reforms, including harsh austerity cuts to public spending. Despite the bailouts, the country's economy hasn't really recovered, and austerity has proved extremely unpopular with Greeks. The government was also required to pay back the funds from these bailouts, setting up a rigorous schedule of debt payments it has struggled to meet. This led to an election earlier this year in which the ruling center-right New Democracy party was ousted.
The anti-austerity party Syriza came to power in January on a wave of promises to obtain more forgiving terms from the country's creditors and roll back cuts mandated in previous bailout deals. In late February, Greece's new prime minister, Alexis Tsipras, came to an agreement with the country's creditors: There would be a four-month extension of bailout funds after Syriza agreed to some concessions on its campaign pledges.
Greece negotiated a deal in June that allowed it to bundle all its IMF loans into one large payment due on June 30. The bundled payment and end-of-the-month deadline raised the stakes for negotiators to meet a deal or see Greece default and possibly leave the eurozone. In a series of tense meetings throughout June, the two sides repeatedly failed to produce an agreement.
On Saturday, Greek Prime Minister Tsipras broke off negotiations and urged the European Central Bank to increase the country's emergency credit until Greeks could vote on the troika's bailout proposal in a July 5 referendum. The ECB refused, prompting capital controls and a mandatory closure of banks and the stock exchange.