Out of money, cut off by its creditors and with its banks shut, a struggling Greece will vote on 5 July in a referendum on whether to accept budget cutbacks in return for desperately needed financing.
Greek finance minister Varoufakis said Greece will not pay IMF debt on 30 June and failure to pay would make Greece default on the IMF loan since Zimbabwe in 2001.
A defiant Greek PM, Alexis Tsipras, appealed to voters not to give into creditors’ demands and insisted on a “no” vote in the referendum to strengthen Athens’ bargaining position.
In the referendum, Greeks would vote if they support a bailout that the creditors have proposed, involving budget cutbacks and tax increases, in exchange for the remaining loans. A “no” vote could mean that a Euro exit is closer for Greece, as the country would have no outside financial aid.
But in another twist, German Chancellor Angela Merkel ruled out new negotiations with Greece until after it votes on a proposal from creditors. Greece sought a short-term bailout extension on 30 June to avoid a midnight default as efforts gathered pace to broker a deal that could keep Athens in the euro.
As the clock ticked towards midnight, euro zone finance ministers convened a last-minute conference call to discuss the Greek request. Tsipras sought a two-year deal covering funding support and debt restructuring, an issue the lenders have refused to tackle.
On 30 June the main part of Greece’s bailout deal expires and with no pact in sight, the 7.2 billion Euros ($8.1 billion) from that deal will be out, leaving Greece on its own.
Jean-Claude Juncker, president, EU Commission, asked Greeks to vote “yes” to the deal, as by the time of the vote, Greece’s bailout programme would have run out.
If Greece defaults on its 1.6 billion euro debt, IMF managing director Christine Lagarde will report to the global lender’s board at close of business, Washington time, that Greece is “in arrears”—the official language for default.
Meanwhile, Greeks can only withdraw 60 Euros ($67) a day from ATMs. In the case of joint accounts it is 120 Euros. The finance ministry on 30 June said 1,000 bank branches would be reopened for pensioners who don’t use cash cards for ATMs.
Pensioners are being told that they will be able to take cash out from 850 bank branches across Greece and these will open from 2 July. Ultimately, they will be limited to 60 euros daily. If they haven’t taken out money from 29 June, they can withdraw 240 euros, said ANA agency.
Banks will be closed till 6 July, after controls were imposed on the banks to prevent a collapse of the system. The European Central Bank had cut off financial support to the banks. But in the case of Greece, that would mean printing a new currency and using it to re-float the banking system.
Although credit and cash card transactions haven’t been stopped, retailers aren’t accepting card transactions. Electronic transfers and bill payments are allowed, but within Greece. However, the government said tourists won’t be affected by the sanctions.
US treasury secretary Jacob Lew said, Nobody knew the fallout from Greek exit. “I feel it should be avoided at all costs,” he added.
Efforts to coax Greece to approach European lenders have stepped up after Greece said it cannot meet the payment due to the IMF.
France, taking a flexible stance towards Greece, is pushing for a pact to avoid a Greek exit from the Euro zone. In this regard, French President, François Hollande, speaking by telephone to US President Barack Obama said, “I am not closed for talks with Greece”.
Merkel, however, ruled out more debt relief to it. She said she won’t allow Europe to forfeit its fiscal principles to keep Athens in the Euro.
Meanwhile, the Indian government is deliberating the Greece crisis with the RBI along with ways to deal with it, said finance secretary Rajiv Mehrishi.
Engineering exporters’s body EEPC India said, the Greece crisis will hit engineering exports as EU is the largest destination. There is an indirect impact from the UK, Italy, Turkey and France.