Greece defaults on its debt

Athens, 1 July 2015 (MIA) - On Monday, Greece officially defaulted on a portion of its debt, held by the International Monetary Fund, after it missed the payment due for June. MIA correspondent in Athens reports from the country that entered uncharted territory as the first developed country to default on the IMF, and has also seen its bailout contract with the European creditors expire, its banks closed and a divisive referendum is due on Sunday.

Greece was due to pay 1,6 billion EUR to the IMF, after it asked all its debts due for the month to be bundled in one large payment by the end of June. The country also defaulted on 470 million EUR to the Central Bank. Greek daily Kathimerini, which has become very critical of the leftist SYRIZA led Government writes that this default makes it impossible for the European Central Bank to providing the necessary lifeline to Greek banks, even if they re-open following the introduction of capital controls.

Some of the banks opened of Wednesday, but only to allow retirees who don't use cards, to withdraw up to 120 EUR. This is the maximum they will be able to take out from their retirement incomes during the week. All others are limited to withdrawing 60 EUR per day from their savings accounts, the rest of it frozen in the banks to protect them from ruinous withdrawals. Greeks have withdrawn over 100 billion EUR from their accounts, nearly half of total deposits, since the financial crisis started in 2010, and in the last days before capital controls were introduced, this turned into a full blown bank run, with over a billion EUR withdrawn daily. Bank liquidity was provided by the European Central Bank, which infused nearly 90 billion EUR to the Greek banks, but this stops with the expiration of the bailout program.

From its total debts, Greece owes 142 billion EUR to the European EFSF fund, which took over much of the debt Greece owed to private financial institutions following the 2010 bailout agreements. Payment of these debts is now also in question, as the Greek Government demands that its debt is reduced through a political agreement. Germany has announced it could open the door for some form of debt relief in the future, in order to encourage Greeks who would still like to see their country remain as part of the Eurozone vote on Sunday. For several days, pro-EU protests were held in Athens' Syntagma Square. SYRIZA, which is now far above other parties in popularity polls, and a host of other Communist and nationalist parties, have called Greeks to vote against the proposed bailout deal at the referendum. Polls show the population divided, with a majority wishing to keep the euro, but evenly divided on the actual referendum question.

A final proposal from the Greek Government for a two year long agreement was given on Tuesday afternoon, and was rejected by Eurozone finance ministers by the evening. Greece has badly used up the good will of key European politicians, including some like Jean Claude Juncker who were instrumental in agreeing the earlier bailouts. Prime Minister Alexis Tsipras and his Finance Minister Yanis Varoufakis were seen as berating the EU, playing negotiating games and eventually calling for a referendum which they clearly announced they would like to end with a negative response.