Greece, creditors to discuss new plan as bailout set to expire

Greece slipped deeper into its financial abyss last night as the bailout programme it has relied on for five years was set to expire and eurozone finance chiefs decided not to extend it a new financial lifeline.

Denied a last-minute bailout extension, the country was also due to become the first developed nation to miss a payment to the International Monetary Fund.

After Greece made a last-ditch effort to extend its bailout, eurozone finance ministers decided in a teleconference late Tuesday that there was no way they could reach a deal before the deadline.

The crisis worsened over the weekend after Prime Minister Alexis Tsipras called a referendum for Sunday on creditors' proposals for reforms in return for bailout loans. That increased fears the country could soon fall out of the euro currency bloc and Greeks rushed to pull money out of ATMs. Tsipras is advocating a "no" vote.

Europe's bailout fund

Greece's latest offer to creditors involves a proposal to tap Europe's bailout fund - the so-called European Stability Mechanism, a pot of money set up after Greece's rescue programme to help countries in need.

The prime minister's office said the proposal was "for the full coverage of (Greece's) financing needs with the simultaneous restructuring of the debt", but provided no further details.

Jeroen Dijsselbloem, the Eurozone's top official, said the currency union's finance ministers would have a teleconference Tuesday evening to assess the proposal.

Speculation had grown over the day that an 11th-hour deal might be possible, and markets edged up, though cautiously.

On Monday, European Commission President Jean-Claude Juncker made a last-minute offer to Greece. Under that proposal, Tsipras would need to write to Juncker and other leaders saying he accepts the creditors' offer, which was on the table last weekend. He would also have to change his position on Sunday's referendum.

Beyond accepting the creditors' proposal, Commission spokesman Margaritis Schinas said the offer would also involve unspecified discussions on Athens's massive debt load of more than 300 billion euros and around 180 per cent of GDP. The Greek side has long called for debt relief, saying its mountainous debt is unsustainable.

Earlier, German Chancellor Angela Merkel had dampened hopes of a quick deal to extend the existing bailout.

"The programme runs out tonight (Tuesday), at exactly midnight central European time," Merkel said in Berlin. "I know of no solid indications to the contrary."

However, she had said talks could continue with Athens even after the deadline.

"Of course, we are not going to cut off our channels of communication after midnight tonight," Merkel said. "That means that the door is open for talks, but that is all I can say at this hour."

A Greek government official said Tsipras had spoken earlier in the day with Juncker, European Central Bank chief Mario Draghi and European Parliament president Martin Schulz. The official, who spoke on condition of anonymity in line with government regulations, didn't reveal what was said.

Meanwhile, Greece is expected to miss a 1.6 billion euro (US$1.9 billion) debt repayment to the IMF due Tuesday. Finance Minister Yanis Varoufakis, asked whether Greece would make the repayment, replied: "no."

If Greece doesn't pay, it will be officially in arrears and will no longer have access to funding from the body until it pays its debt. This, IMF chief Christine Lagarde told the BBC last week, has "never happened in the case of an advanced economy."

EU officials said Greece would lose access to more than 16 billion euros (US$18 billion) in financial support once its bailout expires. The officials spoke on condition of anonymity because contacts about the programme were still ongoing.

Other assistance

Greece can apply for some other form of assistance, but this could take days, even weeks, to organise. An assessment would first have to be made on whether Greece is eligible, what kind of terms the new package would function under, and the kinds of reforms that Athens would undertake in return.

European officials and Greek opposition parties have been adamant that a "no" vote in Sunday's referendum will mean Greece will leave the euro and possibly even the EU.

The government says this is scaremongering, and that a rejection of creditor demands will mean the country is in a better negotiating position.

On the streets of Athens, long queues formed again at ATMs as Greeks struggled with the new capital controls imposed Monday, after a bank run over the weekend following the referendum announcement.

Cash withdrawals have been limited to €60 (US$67) per day. Banks are to remain shut until at least next Monday.

The elderly have been hit particularly hard, with tens of thousands of pensions unpaid as of Tuesday afternoon. Many also found themselves completely cut off from any cash as they do not have bank cards.

The finance ministry said it would open about 1,000 bank branches across the country for three days from Wednesday to allow pensioners without bank cards to make withdrawals. But the limit would be set at 120 euros for the whole week, rather than the 60 euros per day allowed for those with bank cards.

The crisis has roiled global markets as investors fret over the repercussions of a Greek debt default and its exit from the euro - developments that could derail a fragile global economic recovery, as well as raise questions over the long-term viability of the euro currency.

- AP