Greece’s long-running debt crisis has entered a “new and dangerous phase”

Greece has moved closer to default and possible exit from the eurozone after telling the International Monetary Fund it would not be making a debt repayment of €300m (£219m) due on Friday. Greece follows the footsteps of Zambia. A country which eventually ended with debt restructuring. Greeks are digesting the news that they are only the second country after Zambia to bundle its IMF repayments.Greece Default

A crisis that has been going on for more than five years entered a new phase when Athens surprised the IMF by saying it intended to bundle up four payments in June totalling €1.6bn and make them all at the end of the month.

The move came as the Greek government reacted angrily to what was seen as an ultimatum from its creditors – including the IMF – that demanded further austerity and unpopular reforms to VAT, pensions and wage bargaining as the price for €7.2bn in fresh financial help.

Although Greece’s financial position has become increasingly serious in recent months, Athens had the ability to make the €300m payment and the country’s prime minister, Alexis Tsipras, gave the IMF managing director, Christine Lagarde, an assurance earlier this week it would be made on time.

Asked about the repayment due on Friday, Lagarde told reporters: “The payment had been honoured and will be honoured,. I think his words were, ‘Do not worry,.’ I’m confident that will continue to be the case.”

Instead, the decision to delay payments appears to be a show of defiance by Athens against what it sees as unacceptably harsh terms being demanded by its creditors. This increases the chances of Greece defaulting on its debts, losing the support for its weak financial sector from the European Central Bank, and eventually being forced to leave the single currency…..

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Fears over Greece helped to send shares down on Wall Street.

Trading just ended for the day, with the main indices all losing ground. Here’s the damage:

  • DOW JONES UNOFFICIALLY CLOSES DOWN 164.45 POINTS, OR 0.91 PERCENT, AT 17,911.82
  • S&P 500 UNOFFICIALLY CLOSES DOWN 17.56 POINTS, OR 0.83 PERCENT, AT 2,096.51
  • NASDAQ UNOFFICIALLY CLOSES DOWN 38.72 POINTS, OR 0.76 PERCENT, AT 5,060.51

Analysts are describing Greece’s plight as “terrifying” – meaning the country’s future is “unforeseeable”.

“The country is in a mess and I don’t know how it is going to get out of it,” the political commentator Alexis Papachelas told SKAI News.

 

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