Greece officially missed a payment to the International Monetary Fund (IMF) and saw its bailout expire on Tuesday (30 June), capping a fortnight of tumultuous politics.rings by the Greek government to get better terms from creditors.
The developments leave Athens without international support for the first time since 2010 and facing a referendum that some EU politicians say will determine its future in the eurozone.
Greece is now in “arrears” on an €1.5 billion bill, the IMF said at midnight Brussels time – a status which sees the EU and Nato member join the ranks of Cuba and Zimbabwe.
More evidence of Germany playing an influential role through the crisis.
“We’re in a situation of total emergency, the worst crisis we have ever lived through” said ex-premier Felipe Gonzalez, the country’s elder statesman.
The ECB is pushing Spain to accept a loan package from the EU bail-out fund (EFSF), the proper body for fiscal rescues. Mr Rajoy has refused vehemently. Any recourse to the EFSF is viewed with horror in Madrid, entailing an unacceptable loss of sovereignty.
The result is paralysis as both sides refuse to shift ground. Mr Rajoy is clinging to hope that the EU will take care of Spain’s banks through an EMU-wide recapitalization plan. This would avoid stigma and draconian conditions.
Brussels floated the idea on Wednesday for a eurozone “bank union” and use of the European Stability Mechanism — which has not yet been ratified by most states — to rescue banks and sever the dangerous nexus between crippled lenders and crippled states.
The proposals were shot down instantly by Berlin. Such plans amount to debt-mutualization, a form of back-door eurobonds. German opposition is “well known”, said the Kanzleramt.
Sources in Berlin say Germany wants Spain to tap the International Monetary Fund — as well as the EU — to spread the rescue burden to the US, China, Japan, Britain and others.
Full article: Spain faces ‘total emergency’ as fear grips markets (The Telegraph)
Being that Germany is the EU, look for the major influences of future change and reform to come from Berlin — as well as increased power in Berlin’s favor.
The unprecedented and sweeping powers for creditors would indeed deal a huge blow to Greece’s sovereignty, but they could help mobilize more support for the government in Athens from its European partners.
Several German lawmakers have repeatedly said that giving more money to Greece is unthinkable without stricter enforcement and control of the conditions attached to the rescue packages.
Greece is currently locked in a twin effort, seeking to secure a crucial debt relief deal with private investors while also tackling the pressing demands from its European partners and the IMF for more austerity measures and deeper reforms.
Failure on either front would force the country to default on its debt in less than two months, pouring new fuel on the fires of Europe’s debt crisis.
Continue reading article: Germans float direct EU control over Greek budget (AP)