Last night Greece became the first developed country in the world to officially default on its €1.6 billion loan to the International Monetary Fund (IMF).
It was the largest missed payment in the history of the IMF and resulted in Greece being placed in arrears.
Greece’s bailout extension with the European Financial Stability Facility (EFSF) also expired last night since Greek government officials were unwilling to accept the austerity conditions attached to the program after 5 months of failed negotiations.
Klaus Regling, CEO of the EFSF, explained that Greece loses out on the positive results of the EFSF bailout programme.
“It is regrettable for Greece that the EFSF programme will expire today without any follow-up arrangement and that the positive results of the programme are put at risk” Regling said in a released statement.
“Due to the economic policies adopted under the EFSF programme, Greece was on a good path towards strong growth until the second half of 2014” Regling said.
“The many sacrifices which the Greek people had to make were paying off. Greece managed to cut its budget deficit and regain competitiveness” Regling added.
The EFSF programme is Greece’s largest creditor by far with an outstanding loan amount of €130.9 billion.
Started on February 21, 2012 the programme was set to end on December 31, 2014 but was extended twice upon the request of the Greek government.
Greece had the most favorable lending conditions provided to an EFSF or ESM programme country.
The programme Greece received included private sector involvement with sizeable losses for private investors, an average loan maturity over 30 years, and Greece pays neither interest rates nor redemption on the overwhelming part of its EFSF loans until 2023, providing Greece with budget savings of over €16 billion for 2013 and 2014 combined.
Before defaulting last night, Greece’s leftist government made an eleventh hour proposal asking the IMF for a debt extension, sought a 2 year bailout from the European Stability Mechanism (ESM), and requested emergency financing from the European Central Bank (ECB).
Euro group finance ministers are planning to conduct a teleconference on Wednesday to discuss the Greek government’s latest request for another bailout extension and a new 2 year aid package.
The European Central Bank’s governing council is also meeting on Wednesday to decide about the fate of emergency lending for Greece’s banks.
The ECB could maintain the same level or decrease/ increase the amount which helps to keep Greek banks solvent amid waves of deposit withdrawals in recent weeks.
-Johnathan Schweitzer email@example.com