Greece, as expected, was not able to repay 1.6 billion euros it owed to the International Monetary Fund, in what was the largest missed payment in the Fund’s history.
Greece is the first time a developed country has missed such a payment, and the first time a Eurozone country has defaulted on its debt.
But that doesn’t mean automatic expulsion from the Eurozone.
Yanis Varoufakis, the country’s finance minister, made the case on his blog three years ago that “a defaulted Greece can easily remain in the Eurozone,” and that in fact “Europe’s optimal strategy is to let Greece default.”
The Lisbon Treaty, which forms the legal basis of the European Union, actually makes no provision for a member’s expulsion.
The left-wing Greek government had asked European partners for a two-year aid package to cover its financing needs. Later on Tuesday, Greece’s Finance Minister Yanis Varoufakis indicated on a call with European counterparts that Athens might scrap a controversial July 5th referendum if a deal was reached, according to euro zone sources.
The flurry of diplomacy was an attempt to bring creditors back into talks after five months of inconclusive negotiations brought Greece close to leaving the euro currency bloc.
It came as tens of thousands of people descended on Athens’ central Syntagma square over the past 24 hours in two different rallies – one to support the government and the other to push for Greece to remain in the euro.
In practice, though, Greece still has to pay its bills with some kind of money—and it’s running out of euros. At the stroke of midnight, there were still euros in Greek banks, but how long Greece can remain on the currency depends, in part, on how long they can keep euros in their coffers—to wit, whether Greece can scrape together new infusions of euros before it runs out entirely.
Sources: ABC, The Atlantic