Eurozone rejects Greece bailout package
Bankruptcy looms after 18 countries refuse to grant grace period or await referendum
LONDON — Greece moved closer to a perilous bankruptcy Saturday after talks over a bailout package broke down with its creditors, who rejected an emergency extension of the aid that has kept the debt-ridden Mediterranean nation afloat.
The other 18 nations that share the euro currency with Greece said they would not grant a grace period or await the outcome of a referendum the Greek government wants to hold next weekend on the bailout proposals offered by international lenders. Without a deal in hand, Athens is expected to run out of money by Tuesday and default on a payment it owes the International Monetary Fund.
Default may be costly
Such a default could throw the Greek economy into chaos, shut down the country’s banks and threaten its membership in the eurozone. The ill effects could spread to neighboring nations and even the global economy.
European officials blamed Greece’s left-wing government for “unilaterally” breaking off negotiations by announcing early Saturday its surprise intention to conduct a referendum on the creditors’ proposals — and to actively campaign against their approval.
“The process wasn’t finished, as far as we were concerned. The proposals weren’t definitive. They weren’t formally discussed or decided upon,” said Jeroen Dijsselbloem, the leader of the eurozone’s finance ministers. “That is a sad decision for Greece, because it has closed the door on further talks where the door was still open in my mind.”
But Greek officials accused their creditors of backing them into a corner and refusing to budge on a bailout formula prescribing more of the same austerity that has made the Greek economy contract by 25 percent in the past five years.
In a nationally televised speech early Saturday, Prime Minister Alexis Tsipras said Greek voters would have to deliver their verdict on a bailout package that he and his anti-austerity Syriza party oppose.
The call for a referendum took Greece’s negotiating partners by surprise.
Analysts said that if it was a ploy to scare them into sweetening the deal, then it backfired spectacularly, with the other eurozone nations digging in their heels. Instead of talking about new solutions Saturday, Dijsselbloem spoke of insulating the rest of Europe from the fallout of a Greek default.
“The euro area authorities stand ready to do whatever is necessary to ensure financial stability of the euro area,” financial ministers said in a statement after the collapse of talks Saturday.
Still eager for deal
Despite the brinkmanship, the eurozone remains eager for a deal. Although nations such as Germany and France believe they can weather the consequences of a Greek default and its potential exit from the euro, they know that the loss of one of its members would raise serious questions over the stability of the currency.
The Greek finance minister, Yanis Varoufakis, warned as much when he criticized the eurozone’s decision not to extend the current bailout by a few days to allow the referendum to take place next Sunday.
“Especially given that there is a very high probability that Greeks will go against our recommendation and vote in favor of the institutions’ proposal, that refusal will certainly damage the credibility of the (Eurozone) as a democratic union of partner member states, and I’m very much afraid that that damage will be permanent,” Varoufakis said.