Greece facing euro exit after emergency ECB funding terminated

29 Jun 15

Greece’s place in the European currency union hangs in the balance after eurozone finance ministers rejected Athens’ request to extend a bailout programme beyond June 30.

The country’s current bailout expires tomorrow, the same day Greece’s €1.6bn International Monetary Fund debt is due.

After talks at the weekend broke down, Greek Prime Minister Alexi Tsipras called a 5 July referendum for voters to decide on whether to accept a bailout deal offered by international creditors.

Greece also confirmed that all banks would be closed for up to six days and imposed capital controls, limiting withdrawals to €60 a day, following the European Central Bank’s announcement that there would be no emergency funding for Greece.

In a statement, the Eurogroup said bailout measures offered by the troika has been “regrettably” rejected the Greek authorities who “unilaterally” broke off the programme negotiations late on June 26.

“The Eurogroup takes note of the decision of the Greek government to put forward a proposal to call for a referendum, which is expected to take place on Sunday July 5, which is after the expiration of the programme period,” the statement read.

“The current financial assistance arrangement with Greece will expire on 30 June 2015, as well as all agreements related to the current Greek programme.”

EU Commission president Jean-Claude Juncker said he was “deeply saddened” by the weekend’s events. He said Greece had not been offered a “stupid austerity package” although he admitted that “some of the measures will hurt”.

Mario Draghi, ECB president, added: “We continue to work closely with the Bank of Greece and we strongly endorse the commitment of member states in pledging to take action to address the fragilities of euro area economies.”

Yannis Stournaras, Governor of the Bank of Greece, said: “The Bank of Greece, as a member of the Eurosystem, will take all measures necessary to ensure financial stability for Greek citizens in these difficult circumstances.”

IMF managing director Christine Lagarde said she believed a “balanced approach” is required to help restore economic stability and growth in Greece.

“[There must be] appropriate structural and fiscal reforms supported by appropriate financing and debt sustainability measures,” she said.

“The IMF is prepared to continue to pursue that approach with the Greek authorities and our European partners.”

She said that the coming days would “clearly be important” and welcomed the statements of the Eurogroup and the ECB to make full use of all available instruments to preserve the integrity and stability of the euro area.

“The IMF also will continue to carefully monitor developments in Greece and other countries in the vicinity and stands ready to provide assistance as needed,” Lagarde added. 

  • Judith Ugwumadu
    Judith Ugwumadu

    Judith writes about public finance, public services and economics across Public Finance International and Public Finance. She previously undertook reporting stints at Financial Adviser, Global Security Finance and The Sunday Express.

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