Euro zone readies for Greek default after Tsipras referendum call

Sat Jun 27, 2015 7:17pm EDT
 
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By Renee Maltezou and Robin Emmott

ATHENS/BRUSSELS (Reuters) - Greece's European partners shut the door on extending a credit lifeline to Athens, leaving it facing a default that could push it out of the euro after the leftist government rejected tough lender demands and put their bailout deal to a referendum.

Finance ministers of the other 18 countries sharing the euro met for the first time without Greece and flatly rejected its pleas to extend an expiring bailout until after the referendum on July 5 and setting the stage for Athens to default on a crucial IMF payment on Tuesday.

The 18 pledged to do whatever it takes to stabilize the common currency area and said they were in much better shape to do so than at the height of the euro zone crisis a few years ago. In a formal statement, they also implicitly urged Greece to impose capital controls to stabilize its banking system.

The rejection of an extension piled huge pressure on Greek banks, which depend on central bank support to remain afloat, with long lines forming in front of cash machines as people rushed to pull their money out while the banks were still operating normally.

After its surprise decision to call a referendum on the bailout, Athens asked for an extension of Greece's bailout program beyond Tuesday, the day it must pay 1.6 billion euros to the International Monetary Fund or default.

But the other 18 members of the euro zone unanimously rejected the request, freezing Greece out of further discussions with the European Central Bank and the IMF on how to deal with the fallout from a historic breach in the EU's 16-year-old currency.

The swift rejection was a startling demonstration of the degree to which Tsipras had alienated the rest of the currency bloc with a final-hour announcement that upended five months of intense talks.

The Eurogroup of finance ministers shut Greece's Yanis Varoufakis from a meeting in Brussels and issued a statement without him, accusing Athens of breaking off negotiations unilaterally.   Continued...

 
Greek Prime Minister Alexis Tsipras delivers a speech during a parliamentary session in Athens, Greece June 28, 2015.  REUTERS/Alkis Konstantinidis