Greece became first developed nation to default on IMF debt

Jul 1, 2015 15:15 IST

Greece on 30 June 2015 became the first developed nation to default on International Monetary Fund (IMF) debt. It became a defaulter after it missed the deadline for payment of 1.7 billion dollar (1.5 billion euro) to IMF.

The Eurozone Finance Ministers refused to extend its bailout to Greece after it rejected the proposal given by the troika viz., International Monetary Fund (IMF), the European Commission (EC) and European Central Bank (ECB). The proposal said that Greece needs to raise its primary surplus within two years in order to avail the 15.5 billion Euros of funding, which in turn required pension and tax reforms for which the Syriza government is reluctant to.

However, the ministers said that they will discuss a last-minute request from Greece for a new two-year bailout on 1 July 2015. The last country to do so was Zimbabwe in 2001.

Besides, IMF also announced that it had received a request from the Greek authorities for an extension of their obligation and that it would go to the Executive Board in due course.

Greece, which is now in arrears, is at a risk of leaving Euro and shifting back to its old currency Drachma. Euro replaced Drachma as a currency of Greece in 2001 (at the rate of 340.750 drachma to the euro). This may have a major implication for Greece economy and its exports.

The use of Drachma by Greece, which will be of lower value than Euro, will lead to increase in the cost of imports raising the specter of inflation in the already battling economy.

Greece PM called for referendum on extension for bailout programme

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