Greece defaults on debt; all eyes on July 5 referendum

RSTV Bureau

Greece-Crisis-2Greece has become the first developed country in the world to default on Indian Monetary Fund (IMF) loan. The deadline for the 1.5 billion euro loan ended on Tuesday.

Greece has now gone into arrears and cannot receive any more IMF aid without clearing the arrears.

“I confirm that the SDR 1.2 billion repayment due by Greece to the IMF today has not been received. We have informed our executive board that Greece is now in arrears and can only receive IMF financing once the arrears are cleared,” said IMF spokesman Gerry Rice on Tuesday.

Greece failed to strike a bailout deal with the European Union before the deadline ended. The Eurozone was firm on its decision to not lend any more money before Greece changed its stance on the austerity measures as proposed by the European creditors. The new 29.1 billion bailout package was being considered but the deal didn’t go through.

The country also made a last ditch effort to get IMF to extend the repayment date, which the IMF board did not adhere to.

The extension request “will go to the IMF’s Executive Board in due course” explained Rice.

All eyes are now on the crucial referendum that will be held on July 5. The referendum, called by Prime Minister Alexis Tsipras, will decide whether Greece will follow the latest economic proposals of the international creditors. It will be a popular nation-wide vote for a YES or a NO.

If the country votes against the referendum, Greece might be forced to declare bankruptcy and might possibly see an exit from the Eurozone. July 5 will decide if the country will return to Drachma, the modern Greek currency which was replaced by Euro in 2001.

The IMF too is possibly playing it safe and waiting for the referendum results to decide on an extension of the debt deadline.

The left-wing-led government was elected last January on a promise of bringing an end to austerity measures. The new economic measures as proposed by the European creditors will amount to a rise in taxes and cut in pension. Thus PM Tsipras had declared that he may quit as the head of the government if the referendum goes through.

The economic crisis has stoked fear and a sense of unease among the citizens. The government has imposed strict capital controls ahead of the upcoming referendum.

On Tuesday pensioners lined up outside bank branches hoping they might open.

“I came here at 4 a.m. because I have to get my pension,” said 74-year-old Anastasios Gevelidis, one of about 100 retirees waiting outside the main branch of the National Bank of Greece in the country’s second-largest city of Thessaloniki.

“I don’t have a card. I don’t know what’s going on. We don’t even have enough money to buy bread,” the pensioner added.

Greece is said to be in the midst of one of the most acute financial crises seen anywhere in the world in recent years. Some experts believe that an exit from the Eurozone will worsen things for Greece. Adopting the austerity measures will probably be a lesser evil.