Despite last-minute overtures to creditors, Greece defaults on payment

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ATHENS:

Greece made last-minute overtures to its international creditors for financial aid on Tuesday, but it was not enough to save the country from becoming the first developed economy to default on a loan with the International Monetary Fund, according to foreign media sources.

The left-wing Greek government had asked European partners for a two-year aid package to cover its financing needs. Later on Tuesday, Greece’s Finance Minister Yanis Varoufakis indicated on a call with European counterparts that Athens might scrap a controversial July 5 referendum if a deal was reached, according to euro zone sources.

The flurry of diplomacy was an attempt to bring creditors back into talks after five months of inconclusive negotiations brought Greece close to leaving the euro currency bloc.

It came as tens of thousands of people descended on Athens’ central Syntagma square over the past 24 hours in two different rallies – one to support the government and the other to push for Greece to remain in the euro.

Greece, as expected, was not able to repay 1.6 billion euros it owed to the International Monetary Fund, in what was the largest missed payment in the Fund’s history.

Late on Tuesday, the IMF said it would examine a Greek request for a payment extension in due course.

The latest Greek proposals came too late to prevent Greece’s existing aid package – with locked-up funds it needs to pay wages, salaries and debt – from expiring.

Still, in a sign that European officials have not given up on finding a solution for Greece, finance ministers said they would confer on Wednesday over Tsipras’ latest loan request, effectively coming back to the negotiating table.

Sources said the officials are expected to discuss on Wednesday Greek Prime Minister Alexis Tsipras’ request for the new two-year loan to pay debts that amount to nearly 30 billion euros. Tsipras is also seeking debt restructuring, an issue on which lenders have so far been reluctant to compromise.

It was unclear how much the Wednesday call could achieve. Trust between Athens and European capitals is in tatters after acrimonious talks. The relationship further deteriorated after Athens on Saturday decided to put creditors’ proposals for reforms in exchange for financial aid to a July 5th referendum.

The 40-year-old premier says the plebiscite is the democratic way for Greeks to say whether they will accept more budget cuts and taxes in order to maintain international aid. He has been urging people to vote against it, angering creditors.

German Chancellor Angela Merkel has ruled out further negotiations until after Sunday’s referendum.

Jeroen Dijsselbloem, chairman of the euro zone’s group of finance ministers, warned that Athens was welcome to ask for new aid but that it would come with conditions.

“What can change is the political stance of the Greek government that has led to this unfortunate situation,” Dijsselbloem said.