Greece seeks two-year debt deal as bailout talks go down to the wire
Athens admits it won't make the repayment to the IMF by the deadline
PUBLISHED : Wednesday, 01 July, 2015, 2:21am
UPDATED : Wednesday, 01 July, 2015, 2:25am
Reuters in Athens
People read newspapers in central Athens on Tuesday as the country looked set to default on a loan to the IMF. Photo: AFP
Greece requested a two-year rescue deal with the European Union on Tuesday, after admitting it would fail to make a repayment to the International Monetary Fund with just hours left before its EU bailout expires.
The zero-hour appeal came amid a flurry of actions aimed at preventing a chaotic euro-zone exit that could have untold repercussions on international markets and the EU.
The Greek premier's office said Athens had requested an agreement with the European Stability Mechanism "to fully cover its financing needs and the simultaneous restructuring of debt".
The ESM, created in 2012, is designed as a means to handle financial crises in the euro zone.
The move prompted a quick reaction from Eurogroup chief Jeroen Dijsselbloem, who tweeted that the euro-zone finance ministers would hold a teleconference on Tuesday night to discuss the Greek request.
Athens' proposal followed European Commission chief Jean-Claude Juncker's attempt to clinch a "last-minute" solution before Greece holds a referendum on the reform proposals on Sunday. Juncker told the Greek premier a deal would involve accepting the package of reforms that Greece's EU-IMF creditors made at the weekend and backing a 'Yes' vote in the plebiscite.
Prime Minister Alexis Tsipras has urged Greeks to vote 'No' and reject creditors' tough demands in the referendum, but has also pleaded for an extension of the EU bailout, which was expiring on Tuesday last night.
Europe's main stock markets ended the day firmly lower with London's FTSE 100 index falling 1.50 per cent and the DAX 30 in Frankfurt down 1.25 per cent.
Whether an accord was in the offing or not, Greece said it would miss a midnight deadline to make a debt repayment of about €1.6 billion (HK$13.8 billion) to the IMF. It would then become the first country to default on the IMF since Zimbabwe in 2001, and the wealthiest, in terms of standards of living.
The growing possibility that Athens could be forced out of the single currency brought into sharp focus the chaos that could be unleashed.
"What would happen if Greece came out of the euro? There would be a negative message that euro membership is reversible," said Spanish Prime Minister Mariano Rajoy.
"People may think that if one country can leave the euro, others could do so in the future. I think that is the most serious problem that could arise."
German Chancellor Angela Merkel and French President Francois Hollande have warned that the referendum would effectively be a vote on Greece's place in the euro zone.
Additional reporting by Reuters
