Update, July 1, 2015, 8:37 a.m. After effectively defaulting on a debt repayment to the IMF, Greek Prime Minister Alexis Tsipras indicated on Tuesday that his country would be willing to accept previously rejected bailout terms with some minor modifications. Tsipras had originally called a referendum for Sunday on the terms. But following the default, he sent a letter to the nation’s creditors, the New York Times reports, saying Greece would be open to a deal:
In the letter, Mr. Tsipras said he was prepared to accept the European Commission’s proposal of June 28, with five amendments on issues that had been particular sticking points.
He continued to ask for a lower value-added tax on Greek islands, for instance, to help bolster tourism and compensate for the high price of delivering goods to such areas. And he still objected to a system of automatically adjusting pension payments according to the financial strength of the underlying pension funds rather than relying on government assistance to maintain the payments.
But he accepted the bulk of what the Europeans had asked for in their last proposal, including creating strong disincentives to early retirement.
The offer has the potential to resolve the spiraling financial crisis that had seemed to put the country at risk of being forced out of the Eurozone.
Original Post, June 30, 2015, 11:54 p.m. At 1 a.m. Wednesday morning in Athens, Greece failed to make a $1.7 billion loan payment and officially defaulted on its loan from the International Monetary Fund. The IMF, which doesn’t technically use the word default, instead declared Greece in arrears. That is of course not good news for Greece, but, the Wall Street Journal notes, the nonpayment won’t cause much immediate pain for the Greek economy.
The painful process of whatever-this-all-turns-out-to-be is not yet over. Once the country fails to make a payment to a private creditor, like the two billion euros worth of Treasury bills that are coming due on July 10, Greece will officially be in default in every language. That means there is still more to lose and, therefore, more negotiating to be done.
But Tuesday still was not a good day in Greece. How not good?
The Associated Press:
“Greece slipped deeper into its financial abyss …”
The New York Times:
“Greece on Tuesday added its name to a roster that includes some of the world’s poorest and worst governed nations, including Iraq, Sudan, Somalia and Zimbabwe.”
European stocks dipped, as did the euro against the U.S. dollar, but the declines were smaller than earlier this week when the government shutdown the banking system and called a referendum. Greek banks will remain closed until Monday.
The Greeks are set to go to the polls on July 5th to vote on a referendum on whether to accept the creditors' repayment terms. While simultaneously negotiating a new, restructured bailout to keep Greece afloat, Prime Minister Alexis Tsipras’ call for a referendum has ratcheted up pressure on everyone involved. European leaders have urged him to cancel the vote. German Chancellor Angela Merkel countered by saying no negotiations will take place until the Greeks have gone to the polls to decide on whether to accept the creditors' offer, which would require pension cuts and a sales tax hike.
“Late Tuesday, Greek officials were also raising doubts over their plans for a referendum planned for Sunday, in which the government had asked its citizens to vote against pension cuts and sales-tax increases demanded by its creditors,” the Journal reports. “Some officials suggested that Mr. Tsipras and his ministers could campaign for a “yes” if a better offer from the rest of the eurozone and the IMF was on the table, while others indicated that the vote might even be called off altogether.”