Europe

Greece debt crisis: Eurozone to discuss new bailout

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Media captionIt is feared Greece could be forced out of the European single currency

Eurozone ministers are to discuss a Greek request for a new bailout, hours after Athens missed the deadline for a €1.5bn (£1.1bn, $1.7bn) payment to the International Monetary Fund (IMF).

On Tuesday, eurozone finance ministers refused to extend the previous bailout following the collapse of talks.

As a result, Greece became the first European Union country to fail to repay an IMF loan and is now in arrears.

There are fears that this could force Greece out of the eurozone.

In one of two crucial meetings on Wednesday afternoon, officials with the European Central Bank (ECB) will decide whether to grant an emergency loan to Greece.

In the second, eurozone finance ministers will discuss Greece's latest proposal for a third bailout. It would last two years and amount to €29.1bn.

Ministers discuss the proposal in a conference call at 15:30 GMT.

A senior adviser to the Greek government, Elena Panaritis, told the BBC they expected a bailout to be agreed on Wednesday.


Analysis: Chris Morris, Europe correspondent

For the first time in five years of crisis, the Greek government has no access to any kind of international funding from the EU and the IMF. It is skating on thin ice.

The ECB will also decide whether the collateral offered by Greek banks in return for tens of billion of euros in emergency loans is still sufficient.

Greek banks are already closed after ECB funding was capped at the weekend. So Greece's hold on its place in the eurozone, the single currency area that has become the most important symbol of European unity, is more tenuous than ever.

Is Grexit nearer?

Greek debt jargon explained


In other developments:

  • Ratings agency Fitch cut Greece's credit rating from "CCC" to "CC" on Tuesday evening, which is one level above a full default
  • Shares in Asia and Europe rose slightly despite concerns over Greece's stability

Deadlock

The IMF confirmed that Greece had failed to make the payment, shortly after the deadline on Tuesday.

IMF spokesman Gerry Rice said the organisation had received a request from Greece to extend the payment deadline, which he said would go to the board "in due course".

Image copyright AP
Image caption Close to 1,000 banks reopened in Greece on Wednesday for pensioners without bank cards
Image copyright AP
Image caption Pensioners are being allowed a one-off withdrawal of up to €120

With the eurozone bailout expired, Greece no longer has access to billions of euros in funds.

Only three other countries are still in arrears to the IMF - Sudan, Somalia and Zimbabwe. Between them, they owe €1.6bn, only marginally more than Greece.

The ECB has also frozen its liquidity lifeline to Greek banks, that did not open this week.

Withdrawals from cash machines are capped at just €60 a day and long queues have been forming outside banks.

However, up to 1,000 branches re-opened on Wednesday to allow pensioners - many of whom do not use bank cards - a one-off weekly withdrawal of up to €120.


Image copyright AFP/Getty Images

Greek newspaper headlines on Wednesday

Ta Nea (centre-left): "Fears of levy on deposits" - "The ghost of Maidan [Square in central Kiev, Ukraine] over Syntagma Square: The tension between pro-European and anti-European supporters is mounting as we approach Sunday's referendum, leading to fears of Ukraine-style division"

I Efimerida (left-of-centre): "'NO' ahead" - "But blackmail of bank closure is catalyst for people's decision"

Ethnos (centrist): "Zero hour" - "The country under siege since midnight"

I Avyi (pro-government): "'NO" a catalyst for a new deal

Rizospastis (Communist Party newspaper): "They are asking for a new 'bailout deal' noose for the people!"

Eleftheros Typos (right-of-centre): "Greece defaults and Tsipras plays" - "In confusion, the prime minister asks for a restructure of the bailout and a strict agreement"


Eurogroup chairman and Dutch Finance Minister Jeroen Dijsselbloem said on Tuesday it would be "crazy" to extend the Greek bailout beyond its deadline as Athens was refusing to accept the European proposals on the table.

The European Commission - one of the "troika" of creditors along with the IMF and the eurozone's European Central Bank - wants Athens to raise taxes and cut welfare spending to meet its debt obligations.

Greece's left-wing Syriza government, elected on an anti-austerity platform, has been in deadlock with its creditors for months over the terms of a third bailout.

Greece's request on Tuesday asked for funds from Europe's bailout fund - the European Stability Mechanism - as well as a restructuring of Greece's public debt.

But German Chancellor Angela Merkel said she had ruled out further negotiations until after Sunday's referendum, which will ask Greeks if they want to accept the deal offered by their creditors.

The Greek government took the unilateral decision to hold a vote last weekend, angering eurozone ministers.


What happens next?

1 July - Eurogroup - the finance ministers of the eurozone - holds a telephone conference to discuss new proposal from Greek Prime Minister Alexis Tsipras

5 July - Referendum on creditors' proposals takes place, which many say is effectively a vote on Greek membership of the eurozone

20 July - Greece must redeem €3.46bn of bonds held by the European Central Bank. If it fails to do so, the ECB can cut off Greece's access to emergency loans


Image copyright EPA
Image caption Tens of thousands of "yes vote" supporters braved the stormy weather on Tuesday

On Tuesday evening, thousands of pro-EU protesters braved stormy weather and gathered outside the Greek parliament in Athens to urge a 'Yes' vote in a referendum on Sunday over whether the country should accept its creditors' proposals.

It follows a similar demonstration by those advocating a 'No' vote - the path preferred by Mr Tsipras - on Monday.

EU leaders have warned that a 'No' vote rejecting creditors' proposals would mean Greece leaving the eurozone - though Mr Tsipras says he does not want this to happen.

A poll by the Greek newspaper Efimerida ton Syntakton published on Wednesday suggested that 54% of Greeks would vote against the creditors' terms for a bailout.

A previous poll conducted before banks were closed found that 57% would vote 'No'.


Referendum question

The question which will be put to voters on Sunday will not be as simple as whether they want to stay in the euro or not - instead it asks Greeks to approve or reject the specific terms laid out by Greece's creditors:

"Should the agreement plan submitted by the European Commission, European Central Bank and the International Monetary Fund to the June 25 eurogroup and consisting of two parts, which form their single proposal, be accepted? The first document is titled 'Reforms for the completion of the Current Program and Beyond' and the second 'Preliminary Debt Sustainability Analysis'.

"Not approved/NO

"Approved/YES"

Can you make sense of the referendum question?



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