Greece seeks new bailout, world markets settle

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UPDATED: Greece defaults on IMF loan

Eurozone ministers rejected a request from the Greek government for a new bailout as the crisis over its debt repayment continues.

In latest developments:

• The deadline runs out for repayment of an International Monetary Fund loan of €1.55 billion ($2.4 billion) loan;
• European and Greek leaders embark on a week-long campaign beforeSunday’s referendum over bailout terms that no longer apply;
• German chancellor Angela Merkel is holding fast in her call for Greece to overhaul its economy and finances in exchange for bailout funds;
• World sharemarkets were mixed, with many recovering and showing no signs of the panic accompanying previous rounds of the eurozone debt crisis.

New bailout sought
Eurozone ministers rejected a request from Greece for a new bailout as the current rescue deal is set to expire. But talks are continuing after Greece had sought a deal to cover €29.15 billion ($48 billion) in debt repayments between 2015 and 2017.

Meanwhile, Greece is poised to become the first developed country to default on an IMF loan.

Greek Prime Minister Alexis Tsipras proposed the new deal to avoid making a major about-face to accept the economic overhauls and austerity measures sought by lenders.

Referendum confusion
Mr Tsipras and his far-left government are campaigning for a No vote to reject the expiring bailout terms. But European leaders have been putting pressure on him to campaign for a Yes vote.

The referendum has logistical problems as well and is being widely viewed as a choice between Greece staying or leaving the eurozone. The latter would mean re-adopting its own currency, which would allow a sharp devaluation.

Germany stands firm
Chancellor Angela Merkel and her deputy and coalition partner, Sigmar Gabriel of the Social Democrats, say Germany is ready to discuss a new bailout request after Sunday's referendum.
But if it does go ahead, Mrs Merkel says, “We will not negotiate about anything new at all.”

The IMF default isn’t expected to have immediate consequences for Greece’s economy. Its banks and sharemarket remain closed with capital controls on cross-border currency transactions. Greeks holding bank accounts are limited to daily cash withdrawals of €60 a day.

Market effects muted
Sharemarkets in Europe remained under pressure with the Stoxx Europe 600 ending 1.3% lower. On Monday, it recorded a 2.7% loss – its largest single-day percentage decline since October.

Spanish and Italian bonds recovered slightly after Monday’s losses.

Wall Street, stocks rebounded on news of a last-minute diplomatic scramble on the new bailout request by Greece.

At the close, the Dow Jones Industrial Average had gained 23.16 points, or 0.1%, to 17,619.51, while the S&P 500 added 5.48 points, or 0.3%, to 2063.12. The Nasdaq Composite Index was up 28.40 points, or 0.6%, to 4986.87.

Asian markets shrugged off developments in Greece, with China’s volatile stocks reversing a recent sharp selloff that technically put them in bear territory.

The Shanghai Composite Index closed up 5.5%, after falling more than 5% earlier. The index is still off 17% from its June 12 high.

Despite that rout, China’s main benchmark is up 14% for the second quarter, and has more than doubled over the past year.

Hong Kong’s Hang Seng Index rose 1.1%, while listings of Chinese companies, known as H-shares, rose 2.3%.

Australia’s S&P/ASX 200 index ended up 0.7% while shares in Japan rose 0.6%.

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