Greece is waiting to hear whether it will be granted emergency aid from the European Central Bank, as it scrambles to pay wages and pensions without the financial lifeline of an EU bailout.
The country is insolvent and almost bankrupt after five years of €240bn (£170bn) in European bailouts dried up at the stroke of midnight and it became the first EU country to default on its creditors.
On Tuesday, Greece failed to meet a deadline to make a €1.5bn payment to the International Monetary Fund, dealing a historic blow to a Europe committed to the irreversibility of its 16-year-old single currency.
Attention is turning to the ECB, which has poured €89bn into the Greek financial system in recent months to keep banks afloat. The Greek government will be waiting to hear whether the ECB will extend this credit line when the bank’s decision-making governing council meets later on Wednesday in Frankfurt, Germany.
A weekend request from Athens to extend emergency liquidity funding by €6bn was turned down by the ECB. Some analysts think the bank may prefer to do nothing rather than risk charges of political interference.
Eurozone finance ministers will hold a conference call at 11.30am (10.30am BST/12.30pm Athens) to discuss the Greek situation, but are not expected to re-open talks with Greece ahead of the country’s referendum on Sunday.
In the hastily organised referendum that triggered the breakdown of talks, Greeks are being asked to vote on creditors’ bailout terms that are no longer on the table. Athens is campaigning for a no vote, while eurozone leaders have insisted the choice is between staying in the euro or reverting to the drachma.
A poll published on Wednesday showed the lead for the no side narrowed after capital controls were introduced at the weekend.
The ProRata institute poll, published in the Efimerida ton Syntatkton newspaper and reported by Reuters, showed 54% of those planning to vote would oppose the bailout against 33% in favour. But among those polled after the introduction of capital controls, only 46% planned to vote no.
On a day of feverish rumours and hectic telephone diplomacy, eurozone finance ministers decided that a last-ditch offer from Athens was too little, too late. With less than nine hours to go before Greece’s financial lifeline vanished, the government of Alexis Tispras called for a two-year loan from the eurozone totalling €29.1bn, debt relief, as well as a temporary extension of its bailout to avoid missing the IMF payment.
At a last-minute meeting of eurozone finance ministers, the Greek finance minister Yanis Varoufakis offered to cancel Sunday’s referendum, if the eurogroup agreed to the terms.
The German chancellor, Angela Merkel, had already decided there would be no new negotiations until the referendum takes place.
During the Tuesday evening conference call, eurozone ministers decided there was not enough time to ratify the Greek plan in the Athens’ parliament or the German Bundestag. They also felt that the numbers no longer made sense because the Greek economy has deteriorated further since the imposition of capital controls.
The collapse of talks means Greece has lost not only a €7.2 tranche of bailout funds, but €10.9bn that could have been used to recapitalise its cash-starved banks.
Being on the IMF’s list of countries “in arrears” – along with Sudan, Somalia and Zimbabwe – means Greece also loses the €16.6bn it could have got from the fund by March 2016 if it completed its bailout.
Greece needs to find around €9.3bn to pay debts falling due to the IMF, the ECB and some private creditors over the summer, but this sum does not include the bill for public sector wages and pensions. The next big milestone is a €3.5bn debt repayment to the ECB on 20 July.
Observers reported chaotic scenes in streets in Greece this morning, with pensioners queuing to withdraw their monthly pension from a limited number of banks open specifically for that reason.
However, one of the most dramatic days in the Greek debt crisis failed to unsettle investors, who have largely priced in the brinkmanship and uncertainty surrounding negotiations. Oil prices rose and stock markets in Asia were slightly up on Wednesday. The euro weakened slightly against the dollar to $1.1136.
