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Greece defaults on IMF after 11th hour attempt to agree new rescue deal

Greece has become the first developed country in history to default on the International Monetary Fund.

The nation failed to make a €1.5 payment to the IMF on time and has consequently thrust the Eurozone into an emergency.

On Monday evening Tsipras called the president of the European commission, Jean-Claude Juncker, to explore a possible last-minute way out of the crisis after the Greeks abandoned talks with the Eurozone late on Friday and called the referendum [1].

According to the Financial Times, European ministers dismissed the unexpected request from Mr Tsipras for a third bailout in a hurriedly-organised conference call on Tuesday. The €29.1 billion request, sent to the Eurozone’s €500 billion rescue fund on Tuesday, was the latest twist in Greece’s acrimonious stand-off with its international creditors and took many in Brussels by surprise [2].

Eurozone central bankers were preparing on Wednesday to raise the heat on Greece and its banks by restricting their access to emergency loans, a decision that would topple at least one Greek financial institution [3].

George Osborne said the actions of Greece’s government had added to the crisis faced by its country but what was the most important was ensuring financial stability.

He said: “The failure of the Greek government to make its scheduled payments to the International Monetary Fund, and the expiry of Greece’s financial assistance programme, have served only to add to the developing crisis in that country.

“It is vital now that the current uncertainty is resolved, whatever the Greek people decide, to ensure economic and financial stability across Europe”.

The general feeling amongst analysts is that a Greek exit would have limited overall impact on other countries, certainly in economic terms. The Telegraph has reported that Europe’s overall economy is growing and has mostly recovered from the long recession. European banks are also more robust, having gone through a series of stress tests [4], and higher due diligence.

[1] Ian Traynor and Jennifer Rankin, “Greek failure to make IMF payment deals historic blow to Eurozone” www.theguardian.com
[2] Peter Spiegel, “All Eyes on ECB as time runs out for Greece” www.ft.com
[3] Peter Spiegel, “All Eyes on ECB as time runs out for Greece” www.ft.com
[4] Elizabeth Anderson, “Does it matter that Greece defaulted?” www.telegraph.co.uk