Greece slipped deeper into its financial abyss on Tuesday as the bailout program it has relied on for five years expired 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.
“It would be crazy to extend the program,” said Dutch Finance Minister Jeroen Dijsselbleom, who heads the eurozone finance ministers’ body known as the eurogroup. “So that cannot happen and will not happen.”
“The program expires tonight,” Dijsselbleom said.
The brinkmanship that has characterized Greece’s bailout negotiations with its European creditors and the IMF rose several notches over the weekend, when Prime Minister Alexis Tsipras announced he would put a deal proposal by creditors to a referendum on Sunday and urged a “No” vote.
The move increased fears the country could soon fall out of the euro currency bloc and Greeks rushed to pull money out of ATMs, leading the government to shutter its banks and impose restrictions on banking transactions on Monday for at least a week.
But in a surprise move Tuesday night, Deputy Prime Minister Yannis Dragasakis hinted that the government might be open to calling off the popular vote, saying it was a political decision.
The government decided on the referendum, he said on state media, “and it can make a decision on something else.”
It was unclear, however, how that would be possible legally as Parliament has already voted for it to go ahead
Greece’s international bailout expired at midnight central European time, after which the country loses access to billions of euros in funds. At the same time, Greece has said it will not be able to make a payment of 1.6 billion euros ($1.8 billion) to the IMF.
With its economy teetering on the brink, Greece suffered its second sovereign downgrade in as many days when the Fitch ratings agency lowered it further into junk status, to just one notch above the level where it considers default inevitable.
The agency said the breakdown of negotiations “has significantly increased the risk that Greece will not be able to honor its debt obligations in the coming months, including bonds held by the private sector.”
Fitch said it now considered a default on privately-held debt “probable.”
Under credit controls imposed Monday, Greeks are now limited to ATM withdrawals of 60 euros ($67) a day and cannot send money abroad or make international payments without special permission.
In Athens, more than 10,000 “Yes” vote supporters gathered outside parliament despite a thunderstorm, chanting “Europe! Europe!”
The protest came a day after thousands of government supporters advocating a “No” vote held a similar demonstration.
Meanwhile, on the streets of Athens, long lines formed again at ATM machines as Greeks struggled with the new restrictions on banking transactions.
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 beginning Wednesday to allow pensioners without bank cards to make withdrawals. But the limit would be set at 120 euros for the whole week.