Greece stares at IMF default days ahead of referendum

Thousands took to Greece’s streets on Monday night to support their government’s opposition to the latest debt proposals after a clash with the country’s creditors forced a shutdown of its banks and brought the country close to financial collapse.

Talks between Greece’s left-wing government and its creditors — the “troika” of the European Union, European Central Bank and International Monetary Fund — fell apart last week after Prime Minister Alexis Tsipras said he would put the latest proposals to a referendum.

Tsipras sought to calm nerves on Monday by leaving the door open to talks, saying the July 5 plebiscite on creditors’ latest cash-for-reform plans would leave the country “better armed” in the fight for a debt deal.

But the premier also made clear Greece would be unable to make the 1.5 billion euro ($1.7 billion) payment due to the International Monetary Fund on Tuesday, the same day its international bailout programme expires.

“(How) is it possible the creditors are waiting for the IMF payment while our banks are being suffocated?” he said in a late-evening interview on ERT television.

EU leaders including Germany’s Angela Merkel, France’s Francois Hollande and Italy’s Matteo Renzi, wrong-footed by Tspiras’s shock announcement of the vote over the weekend, warned it would effectively be a vote on Greece’s place in the euro.

On Monday, an emotional European Commission head Jean Claude Juncker bitterly criticised Tsipras, saying he felt “betrayed” by the leftist Syriza government’s behaviour and adding it was time to tell voters “the truth”.

“A ‘No’ would mean, regardless of the question posed, that Greece had said no to Europe,” said Juncker, previously Tsipras’s closest — and sometimes only — ally in five months of debt talks.

But Greek Finance Minister Yanis Varoufakis hit back, telling British newspaper The Daily Telegraph Athens could seek legal action to stop the country being forced out of the eurozone.

The issue was one of the most discussed trends on Twitter in Pakistan as well.

‘Sudden death or slow death’

Tsipras has called for Greeks to vote against the proposals and staked his own career on the outcome of the vote, saying he was not a prime minister who would stay in place “in all weathers”.

In Greece, shocked locals formed huge queues at ATMs after banks were shut down, some waiting for hours to withdrawn the 60 euros ($66) they are allowed per day.

“I feel like I’m voting for sudden death or slow death,” said 38-year-old office manager Maria in Athens, who wants Greece to stay in the EU. “It feels like it’s game over.”

But many Greeks backed the government’s defiant stance against the country’s creditors, who they blame for forcing the country into  years of painful recession by demanding swingeing austerity cuts.

More than 17,000 people took to the streets in Athens and the country’s second city of Thessaloniki to protest against the latest bailout proposals.

“Our lives do not belong to the creditors!” read banners held aloft by demonstrators in the capital.

Aware a Greek exit from the eurozone would leave a permanent scar on the EU, its leaders have indicated they could still be open to an agreement.

Hollande and US President Barack Obama agreed in a telephone call to “combine their efforts to favour a return to talks,” a statement from the French presidency said.

Eurogroup head Jeroen Dijsselbloem also said further talks were possible and Merkel said any new negotiations with Greece should come after the referendum.

Tsipras said he too was ready to return to the table after the popular vote.

“Our aim is for the referendum to be followed by negotiations for which we will be better armed,” he told ERT television, vowing to “respect the decision” of the Greek people.

Uncharted territory

Greece’s imminent default takes the country and the rest of the eurozone into uncharted territory.

Global stock markets plummeted on Monday as investors tried to stomach the likelihood that Greece could really leave the single currency after months of wrangling.

Standard & Poor’s rating agency downgraded Greece’s credit rating deeper into junk territory, saying the referendum brought it closer to default.

Fitch also cut its ratings on four major Greek banks to “restricted default” on Monday after the government ordered commercial banks closed for a week and established capital controls.

Meanwhile leaders in fellow bailout recipient Portugal, widely considered to be the next weakest eurozone economy after Greece, tried to reassure investors of the health of the economy after the Lisbon stock market slid more than five percent on Monday.

Greece has debt worth nearly 180 percent of its GDP after receiving 240 billion euros of bailout cash since 2010. Unemployment has more than doubled since 2009 to 25.6 percent and pensions and benefits roughly halved between 2010 and 2014. – AFP