Greece becomes first developed country to default on IMF

Media reports,Cash-strapped Greece missed a 1.5 billion euro ($1.7 billion) payment to the International Monetary Fund on Tuesday as last-ditch efforts to find a compromise with official EU lenders came to naught.

The missed payment made Greece the only developed country ever to fall into default with the global crisis lender and underscored the utter failure of more than five months of efforts to reshape the rescue of the country's economy and prevent it from dropping out of the eurozone.

The future of efforts to restore its finances and meet creditor demands for reforms were in question, with fresh proposals from Athens spurned Tuesday as the country moved toward a referendum Sunday on EU bailout offers.

IMF spokesman Gerry Rice confirmed that the payment due in Washington at 2200 GMT Tuesday had "not been received." "We have informed our Executive Board that Greece is now in arrears and can only receive IMF financing once the arrears are cleared," he said in a statement.

Greece had made a last-minute request for the IMF to extend the payment deadline, something the crisis lender has only done twice before, in 1982 for Nicaragua and Guyana. Rice confirmed the request but the board did not rule on it. The request "will go to the IMF's Executive Board in due course," he said.

- Uncharted waters -

But that would not negate the fact that Greece has pushed into uncharted waters in its five-year-old bailout.

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As the IMF froze its loan program to the government, the European Commission-European Central Bank assistance also expired on Tuesday. That means the lenders the country has relied on since 2010 to balance its finances have cut it off, heightening expectations that it will also default in July on payments to the EU and possibly make a tumultuous exit from the eurozone.

When EU and Greek officials could not reach agreement over the weekend on an extension, Athens broke off and announced the referendum, asking Greeks to say if they want the EU deal being offered, which includes cuts on pensions and other tough reforms.

With the call for the referendum, and Prime Minister Alexis Tsipras urging Greeks to vote "no" on a deal he said would humiliate the country, the ECB froze its essential liquidity lifeline to Greek banks, and Greece implemented capital controls and shut banks for a week to stanch any further gush of money from the country.

Rating agencies further downgraded the country's debt, now worth nearly 180 percent of its GDP.

And they said that after having received two bailouts worth 240 billion euros, the country's economy is now expected to contract again this year. Unemployment has more than doubled since 2009 to 25.6 percent and pensions and benefits were roughly halved between 2010 and 2014.

- Last-ditch dice roll -

In a last-ditch roll of the dice, Greece proposed a fresh two-year support deal with the European Union on Tuesday. Athens asked for a nearly 30-billion-euro line of funds from the European Stability Mechanism "to fully cover its financing needs and the simultaneous restructuring of debt."

But after a conference call, EU politicians confirmed that they were not willing to accept it. "The practical circumstances is that the old program expires tonight at 12 and practically and legally there's little we can do," Eurogroup chief Jeroen Dijsselbloem told CNN.

Chancellor Angela Merkel of Germany stuck to Berlin's hard line when she said she would not discuss any new Greek request until after Sunday's referendum. "Before the referendum Germany can't negotiate a new request" for assistance, Merkel was quoted as saying by a lawmaker of her conservative Christian Democrats.

According to unconfirmed reports, Greece offered to cancel the referendum in order to reopen talks, but that too proved too late. The ministers do plan to hold further discussions Wednesday morning on a request for a new bailout. But the situation will be markedly changed with Greece's funding lines cut off.

- Protests for and against -

The eleventh-hour appeal came as 20,000 pro-bailout supporters took to the streets of Athens, a day after a large rally backing Tsipras's "no" stance on Monday. Protesters carried banners featuring slogans such as "Greece is Europe" while the cry "resign" went up from the crowd repeatedly. Lawyer Vassiliki Salaka said those in charge of Greece now were "incompetent, they lack organization, they don't know what they want."

But many other Greeks also back the government's defiant stance against the country's creditors since it was elected in January, blaming creditors for forcing Greece into years of painful recession by demanding tough austerity cuts.

Pro-Greece demos were set to take place this week in Berlin, Paris, Brussels, Rome and Amsterdam.

SLIDESHOW: The Greece crisis in pictures

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1/16 SLIDES© Kostas Tsironis/Bloomberg

WHAT IS GREXIT?

Are you wondering what is Grexit that financial and political markets are talking about? To put simply, Grexit means the exit of Greece from the Eurozone. The possibility of Greece going the Grexit way may soon become a harsh reality if it fails to make its €1.7 billion (US $1.9 billion) repayment to the IMF on June 30, 2015. 

VIDEO: Greece misses 1.5 billion euro payment