Eurozone Readies for Greek Default After Tsipras Referendum Call

File photo: Greek Prime Minister Alexis Tsipras

Finance ministers of the other 18 countries sharing the euro met for the first time without Greece after flatly rejecting its pleas to extend an expiring bailout. The Syriza government had asked for an extension until after a July 5th referendum in which Greek voters would decide on whether to accept new, tough bailout terms that the government opposes.

Without the extra time, Athens is set to default on a crucial IMF payment on Tuesday.

The 18 blamed Greece for breaking off negotiations and pledged to do whatever it takes to stabilise the common currency area, declaring they were in much better shape to do so than at the height of the Eurozone crisis a few years ago.

“We are completely clear that we have to do everything to fight any thinkable contagion threat,” said German Finance Minister Wolfgang Schaeuble. “We are resolved to prevent any uncertainty in the financial markets.”

In a formal statement announcing that “the current financial assistance arrangement with Greece will expire on June 30, 2015,” the 18 also implicitly urged Greece to impose capital controls to stabilise its banking system.

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

Greek Finance Minister Yanis Varoufakis insisted that a deal could still be reached in time for the IMF deadline on Tuesday, warning the credibility of the Eurozone could be permanently damaged by its rejection of Greece’s plea for more time.

“It’s a sad day for Europe,” he said as he left the European Council headquarters in Brussels, where the other Eurozone ministers were meeting without him.

© Thomson Reuters 2015