EU to Greece: Make deal by Sunday or face bankruptcy
European leaders gave Greece a stark ultimatum Tuesday night: Reach a new bailout agreement with its creditors by Sunday or face bankruptcy and expulsion from the euro currency system.
The leaders gave Greece until Thursday to submit new economic reform proposals to justify fresh lending by international creditors, and they said the group would meet again Sunday to make a final decision on whether to approve another bailout for the distressed nation.
"If this does not happen, it will mean an end of the negotiations with all the possible consequences, including the worst-case scenario, where all of us will lose," European Council President Donald Tusk said in a statement.
"Our inability to find agreement may lead to the bankruptcy of Greece and the insolvency of its banking system," Tusk added.
"Tonight I have to say loud and clear that the final deadline ends this week," Tusk said.
His last-ditch ultimatum came after eurozone finance ministers expressed deep frustration over the latest proposal Greece brought to a meeting in Brussels on Tuesday.
On Sunday, Greek voters soundly rejected an earlier bailout proposal by creditors — the European Central Bank, International Monetary Fund and the European Commission — as too onerous. Greek Prime Minister Alexis Tsipras thought the results would provide him more leverage to soften the bailout terms.
Instead, eurozone officials were dismayed that Tsipras didn't come to Tuesday's gathering with a detailed written proposal.
"I'm extremely somber about this summit," Dutch Prime Minister Mark Rutte said, according to the Associated Press. "I'm also somber about the question of whether Greece really wants to come up with proposals, with a solution."
According to the AP, German Chancellor Angela Merkel warned Tsipras: "We are no longer talking about weeks but very few days."
The dramatic negotiations come as Greece's banking system and economy face collapse without a new lifeline. Greece failed to make a $1.8 billion debt payment by June 30 and is due to make another $3.9 billion payment by July 20.
Banks have been closed for a week, with strict limits on daily ATM withdrawals, and will stay closed Tuesday and Wednesday amid fears the banking system may soon run out of cash.
On Monday, the ECB said it would not increase the amount of emergency credit that it provides to Greek banks.
A Greek exit from the euro would be an unprecedented move with unforeseen consequences for the 19-nation bloc that uses the currency. European leaders were preparing a plan in the event of a "Grexit."
In Washington on Tuesday, President Obama spoke by phone with Tsipras and with Merkel, urging a deal on the Greek debt crisis, White House spokesman Josh Earnest said. Merkel has been demanding that Greece tighten its belt in return for new loans.
After Sunday's vote, Tsipras replaced combative finance minister Yanis Varoufakis with his deputy, Euclid Tsakalotos in an effort to smooth the path to an agreement.
U.S. and European stocks initially tumbled as the standoff over Greece's debt crisis became more uncertain, but U.S. stocks largely recovered by early afternoon. The Dow Jones industrial average closed up 93 points after tumbling as many as 200 points.
But European markets closed sharply lower as Germany's DAX dropped 2%, France's CAC 40 fell 2.3% and Britain's FTSE 100 index lost 1.6%. The Athens stock exchange will stay closed until Wednesday.
The euro fell 1.2% to $1.0928.
Asian markets were mixed ahead of the meetings. Japan's Nikkei 225 index gained 1.3% to close at 20,376.59 while Hong Kong's Hang Seng index lost 1%. The Shanghai composite dropped 1.3% despite official efforts to shore up Chinese shares, which have fallen nearly 30% after peaking June 2.
