Monday, June 29, 2015

Greece to Default on Payment to International Monetary Fund

Frankly, I still don't see Greece leaving the European Union, but this is a major development.

At WSJ, "Greece to Default on $1.73 Billion IMF Payment":

European leaders appealed to Greeks to vote “yes” in a referendum on their country’s bailout, warning that the risk of Greece’s exit from the euro was real, as Athens confirmed it wouldn’t be able to make a loan repayment to the International Monetary Fund due on Tuesday.

The Greek government’s decision to call a vote on measures its creditors demand in return for more bailout aid has cast the country into uncharted waters. As of Tuesday, Greece will be cut loose from international rescue loans for the first time in more than five years. It will also default on the €1.55 billion ($1.73 billion) IMF payment, whose deadline is the same day.

Many economists and officials fear that without further financial support, Greece may have to abandon the euro, sparking a messy departure from the bloc. The European Union also hopes to avoid contagion from spreading to other parts of the 19-country eurozone after Greece’s decision over the weekend to shut down its banking system for at least a week to prevent money from flooding out of the country.

“You shouldn’t commit suicide because you’re afraid of dying,” Jean-Claude Juncker, the president of the European Commission, said in a speech aimed at convincing Greeks that the budget cuts and policy overhauls their government has rejected are actually good for their country.

“You should say ‘yes’ regardless of what the question is,” he said. A “no” vote, however, “will mean that Greece is saying ‘no’ to Europe.”

Stocks and bonds fell around the world on Monday, but there was little sign of outright panic. European stocks recovered slightly from early losses.

Bonds in Italy, Spain and Portugal—highly indebted countries seen as vulnerable to the Greek crisis—also pared losses after initial sharp falls, and remain far from the levels seen in 2012 or 2013, when banking problems in Spain and Cyprus raised doubts over the eurozone’s integrity.

Eurozone finance ministers refused on Saturday Athens’s request to extend the European portion of Greece’s €245 billion bailout by an extra month. That would have carried Greece past the July 5 vote, but likely still left the government without enough funding to pay the IMF.

Greek Prime Minister Alexis Tsipras spoke by phone with Mr. Juncker and European Parliament President Martin Schulz and asked for help getting an extension to the bailout, a Greek government official said.

“The Greek prime minister expressed the position that the democratic expression of the Greek people is hindered by the closure of banks, which doesn’t apply with the democratic tradition of Europe,” the official said.

Another government official said that some branches of Greek banks would reopen by Thursday for those who don't have a debit or credit cards.Greeks can withdraw as much as €60 a day.

Mr. Tsipras and his government are calling on Greeks to vote “no” to send a signal to Europe and the IMF that Greece wants a better deal for continued rescue loans. Mr. Juncker rejected the argument that such a vote would give the government a better negotiating position.

“Greek citizens who are being called to vote next Sunday need a clearer picture of what’s at stake,” Mr. Juncker said.

French President François Hollande issued a similar warning. “It’s a question of knowing whether the Greeks want to remain in the eurozone—which is where they belong in my opinion—or if they will take the risk of exiting,” Mr. Hollande said after an emergency meeting with top ministers and finance advisers.

Mr. Hollande also stressed that France and the rest of the eurozone are now in a better position to withstand a Greek departure. “Today the French economy is robust—much more so than four years ago—and it has nothing to fear from what could happen,” the French leader said...
Keep reading.

Also, "Greece Orders Banks Closed, Imposes Capital Controls to Stem Deposit Flight."

And at Memeorandum.