Eurozone refuses to extend Greece bailout
TALKS WILL CONTINUE TODAY ON ATHENS’ NEW AID PLAN REQUEST
Eurozone finance ministers refused to extend Greece’s bailout yesterday hours before its expiry and a possible IMF default but talks will continue today after Athens asked for a new aid plan, officials said.
Greek Prime Minister Alexis Tsipras requested a two-year rescue deal with the European Union to save the crisis-hit country, just hours before the European part of its EU-IMF bailout expires at 2200 GMT.
Tsipras also requested a short extension to its current bailout programme to avoid a “technical default,” with a €1.5 billion (Dh6.1 billion) payment due to the International Monetary Fund imminently.
But after a conference call to discuss the last-minute proposal, EU politicians confirmed that they had not agreed to it.
“Last deadline for Greece program extension was weekend. Due to parliamentary procedures, unable to extend program beyond today,” Slovakia’s Finance Minister Peter Kazimir wrote on Twitter.
Finnish Finance Minister Alex Stubb said an extension was “not possible”, adding requests for a new rescue programme with the European Stability Mechanism (ESM), the EU’s bailout vehicle, “is always dealt with through normal procedures.”
Eurogroup head Jeroen Dijsselbloem told CNN: “The political circumstance and the political stance... doesn’t seem to have changed - we are still of course awaiting the referendum.”
Vote suspension offer
However Malta’s Prime Minister Joseph Muscat said that Greece had offered to suspend its planned referendum on its bailout terms if negotiations with the EU are reopened, the Times of Malta reported.
Before the Eurogroup call ended, the European Financial Stability Fund (EFSF), a body which helps support Eurozone countries in difficulty, confirmed that the end of the bailout was imminent. “It is regrettable for Greece that the EFSF programme will expire today without any follow-up arrangement and that the positive results of the programme are put at risk,” its boss Klaus Regling said in a statement.
“Due to the economic policies adopted under the EFSF programme, the country was on a good path towards strong growth until the second half of 2014.”
A Greek government source said the talks had concluded for the day and were set to resume this morning “to allow finance ministers to examine the proposals of the Greek government”.
The unexpected twists and turns in Greece’s negotiations with its creditors over the past two weeks have literally exhausted even standard cliches to describe the theatre involved, according to financial analysts.
“The news that Greece has requested a two-year bailout programme from the ESM office has come as a surprise to the market after we spent most of the morning accepting that Greece was going to default. This [the new development] throws a cat among the pigeons and leaves a number of freshly unanswered questions,” said Kathleen Brooks, Research Director UK EMEA at FOREX.com.
The development has left analysts and markets wondering: Will the request be accepted? (Greece has also asked for debt restructuring, something that has not been allowed before); Will Greece be able to pay the International Monetary Fund? The Greek Finance Minister has reiterated that they will not pay ahead of tonight’s deadline; Will Sunday’s referendum go ahead?; And What does this mean for Grexit fears?
Many analysts are at their wits end as no one expected Greece to ask Eurozone authorities for a new, third bailout in a bid to try and secure financial lifeline hours before the country’s current rescue deal expires.
Whether the new request for a bailout is in response to harsh criticism the Greek government is facing from market players who are not party to European politics is the sudden change of heart, it clearly has thrown up more questions than answers.
Analysts say this development adds up to even more uncertainty. The markets are taking the news gingerly, and there has been no positive impact from this event.