Greece misses IMF payment after last-minute request for third bailout
Agencies downgrade the country's credit perspectives
Greece missed Tuesday's 23:00 deadline to make a €1.6bn repayment to the International Monetary Fund, becoming the first European economy to default on a loan with the institution.
The IMF confirmed that Greece had not made its scheduled repayment and declared the country “in arrears”, avoiding to use the term “default”, because the IMF is not considered a commercial lender.
IMF spokesman Gerry Rice said Greece can now only receive further funding from the global lender once the arrears are cleared and confirmed that the country had asked for a repayment extension, “which will go to the IMF’s Executive Board in due course".
Read more: Greece requests ESM support from Eurozone
The Hellenic nation handed a last-minute proposal on Tuesday, requesting a new two-year bailout programme from the European Stability Mechanism to help pay €29.15bn in debt due between 2015 and 2017.
The 19 Eurozone finance ministers held a teleconference call on Tuesday evening and dismissed Greece's offer.
Read more: Eurogroup ends without agreement
“We won’t negotiate about anything new at all until a referendum, as planned, takes place,” German Chancellor Angela Merkel said. “This evening the programme expires.”
Greek Finance Minister Yanis Varoufakis sent a letter to the Eurogroup's chairman Jeroen Dijsselbloem assuring that Greece was "fully committed to service its external debt in a manner that secures the viability of the Greek economy, growth and social cohesion".
Dijsselbloem warned that Athens could ask for new aid, but that it would come with conditions.
“Any talks about a future program will have to be discussed in the Eurogroup” and “will have to be assessed by the institutions,” Dijsselbloem said Tuesday night.
"What can change is the political stance of the Greek government that has led to this unfortunate situation," Dijsselbloem commented.
Pro-Europe demonstrators rallied in Syntagma Square in Athens outside Parliament on Tuesday night shouting: “Vote yes to Europe.”
Fitch Ratings downgraded Greece's long-term foreign and local currency Issuer Default Ratings (IDRs) and its ratings on the country's senior unsecured foreign and local currency bonds by one notch to 'CC' from 'CCC'. The short-term foreign currency IDR was affirmed at 'C', and the Country Ceiling was lowered to 'CCC' from 'B-'.
Standard & Poor's lowered its long- and short-term counterparty credit ratings on four Greek banks - Alpha Bank, Eurobank Ergasias, National Bank of Greece and Piraeus Bank - to 'selective default' from 'CCC/C. The downgrade followed the country's limits to deposit withdrawals, the closure of bank branches for a full working week, and the prohibition of money transfers out of Greece unless authorised by the Greek Ministry of Finance.
“The rating actions reflect our opinion that private individuals' lack of access to their deposits on a timely and in-full basis, and the constraints to their ability to transfer funds, constitute a selective default under our criteria,” S&P said in a note.
The Greece people will have to vote for a choice of debt enslavement over decades, or a sudden sharp spiral into default
CMC Markets UK analyst Michael Hewson commented that “Irrespective of the outcome of the vote, if it happens, due to monumental incompetence on all sides the Greece people will have to vote for a choice of debt enslavement over decades, or a sudden sharp spiral into default, neither of which is particularly appealing.”
Meanwhile, Barclays analysts said that “the examples of IMF defaults are rare, as it has been regarded in some way as a default to the international community.”
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