EU rejects Greek bid to extend
The talks in Europe over how to save Greece from defaulting on its bailout loans have broken down.
On Saturday, after Greece refused to accept the Eurozone's latest proposal, European finance ministers rejected the troubled nation's request for a one-month bailout extension.
"Regrettably, despite efforts at all levels and full support of the Eurogroup, this proposal has been rejected by the Greek authorities who broke off ... negotiations," a statement from the finance ministers said.
Greece faces a hard deadline on Tuesday for making a payment to the International Monetary Fund, one of its main bailout lenders. If it doesn't make that payment, Greece will become the first developed country to default on the IMF.
The brinksmanship took a sharp turn on Friday, when the Greek government threw out the bailout proposal from its international creditors.
The latest developments put the country's future in the euro on the line.
After weeks of talks, Prime Minister Alexis Tsipras said he could not accept the terms being offered by Europe and the IMF. He said he would recommend that Greeks vote against them in a referendum on July 5.
That brought an abrupt end to a series of discussions aimed at finding a way for the creditors to release the remaining 7.2 billion euros of Greece's huge bailout, in return for budget savings and economic reforms.
Now European leaders seem to be turning to a Plan B -- focusing on how to mitigate the damage of a Greek default.
"The euro area authorities stand ready to do whatever is necessary to ensure financial stability of the euro area," the finance ministers said Saturday.
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The prospect of a default may force the European Central Bank to curtail the emergency funding that has been keeping Greek banks afloat while account holders withdrew tens of billions of euros.
The ECB was reported to be planning to an emergency call Sunday to discuss funding for Greek banks. The outcome of that meeting could determine whether Greece will have to limit cash withdrawals starting on Monday.
Twitter users in Athens were already reporting signs of lengthening queues outside ATMs in the early hours of Saturday morning.
Left-wing leader Tsipras was elected earlier this year on a promise to end austerity. But Europe and the IMF have largely stuck to their guns, arguing that Greece needs to generate surpluses so it can service its enormous debts.
European governments are caught between trying to find a way to help Greece recover from five years of crisis, and concerns among their own voters about throwing good money after bad.
Tsipras said the demand by the bailout lenders for more labor market reform, cuts to pensions and public sector wages, and increases in taxes on food, restaurants and tourism amounted to an attempt to humiliate "the entire Greek people."
"These proposals mainly highlight the insistence of the IMF on harsh and punitive austerity," Tsipras said on Greek TV.
The Greek government has been negotiating with its creditors over the terms of the bailout agreement for four months.
While Tsipras disapproves of the new bailout plan, he said he would respect the way the public votes on July 5.
But by then it may be too late. The existing bailout agreement expires on Tuesday, and it's almost impossible to imagine Europe agreeing to extend given the Greek government's resolute opposition to its proposals.
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