The ministers of the 18 nations that share the euro as a common currency refused to extend a deadline for the Greek bailout until after July 5, when Athens held a referendum on the latest financing proposal rejecting the government of Alexis Tsipras.
The euro area on Saturday closed the door to an extension of Greece’s credit line and left the country facing imminent default that could cause the output of the block, following the rejection of Athens to the tough demands of the lenders and the call for a referendum to decide on a rescue deal.
The finance ministers of the other 18 countries that share the euro met for the first time without Greece and flatly rejected his request to extend a bailout until after the referendum on July 5.
This sets the stage for Athens falls on a default by the possibility of breaching the Tuesday a crucial payment to the IMF.
The 18 countries pledged to do whatever is necessary to stabilize the currency bloc and said they were better off than at the height of the crisis a few years ago.
In a formal statement, also implicitly they urged Greece to impose capital controls to stabilize its banking system.
The refusal of an extension of the rescue increased the high pressure that exists on banks Greeks, who depend on the help of the central bank to stay afloat. During the day, long lines formed in front of ATMs as people rushed to withdraw their money.
After his surprise decision to call a referendum on the bailout, Athens requested an extension of bailout program beyond Tuesday, when to pay 1,600 million euros to the IMF or fall into a default.
However, the rest of the euro zone unanimously rejected the request, freezing fresh talks between Greece, the European Central Bank and the IMF on how to deal with the consequences of a historic event in the 16 years of the euro.
The rapid rejection was a striking demonstration of the degree of discomfort there with the first Minister Alexis Tsipras in the currency bloc by an announcement that ended five months of intense negotiations.
“The current financial assistance agreement with Greece will expire on June 30, 2015, and all related agreements with the Greek program, “said Eurogroup finance ministers.
The Greek Parliament met in the evening to see if he approved the referendum request that Tsipras called challenging the Greeks to reject the “insulting” offer to redeem foreign creditors on July 5.
“The day of reckoning is approaching for the creditors, the time when they will see that Greece will not surrender,” he said a speech mixed with references to democracy and national dignity Parliament.
“I am confident that the Greek people will stand up to the historical circumstances and issue a resounding ‘No’ to the ultimatum” said at the close of the debate before the vote.
The parties pro-European opposition, meanwhile, joined in condemning the decision and fueled speculation that the Government of Tsipras might have to quit if voters support the rescue plan.
“In the referendum, the agreement has not really decided. Will be deciding the fate of our country to remain in the euro, “said conservative former Greek Prime Minister Antonis Samaras during an evening debate in Parliament.
The offer of creditors requires Greece to cut the pensions and raise taxes, something that Tsipras has long argued deepen one of the worst economic crisis in modern times in a country where a quarter of the workforce is unemployed.
Caught between fears economic collapse and the demands of international creditors, some opinion polls released on Saturday pointed to a majority of Greeks are in favor of accepting the bailout terms.
Questions in the air
Many questions were in the air on the referendum, which was convened to approve the terms of an offer to redeem perhaps is no longer on the table.
But amid growing fears that the foundations of the euro area could be severely weakened if Greece was forced to leave the block, President of the European Council, Donald Tusk, said Athens must continue in the money group.
“Greece is and should remain a member of the eurozone, “Tusk said on Twitter.
” I’m in touch with the leaders to ensure the integrity of the euro area 19 countries, “he added.
While European officials have repeatedly insisted that the financial firewall built during the debt crisis in the euro zone would limit the impact of any Greek exit, the long-term effects are unknown.
Jeroen Dijsselbloem, Eurogroup Chairman said that Greek lawmakers should consider if the referendum is cautious before agreeing to do so.
Emphasizing the mutual incomprehension that marked months of angry exchanges between the government led by Syriza party and its European partners, the Greek finance minister, Yianis Varoufakis, still hopes to reach agreement.
“In this crucial time, the Greek government is struggling to there is a last-minute deal on Tuesday” , Varoufakis said.
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