10:22 a.m. EDT June 30, 2015 Greek Finance Minister Yanis Varoufakis said Tuesday that his country would not make a debt payment to the International Monetary Fund by a midnight deadline, setting the stage for a showdown with its creditors ahead of an effective national referendum on its membership of the euro currency.
The development comes amid early reports that Greece has proposed a last-minute two-year deal that would see it get a new bailout from the eurozone.
Athens has until 5 p.m. ET to repay the $1.8 billion it owes as part of a $270 billion aid package it received from the IMF, European Central Bank and European Commission — 19 eurozone governments — during the financial crisis. Next month Greece is also due to pay the ECB $3.9 billion.
Greece had previously indicated it would not be able to make the payment.
Talks between Greece and its creditors have broken down as Athens has tried to negotiate less onerous repayment terms tied to austerity measures. Global markets on Monday tumbled over fears that the country's attempts to strike a better deal could see it forced out of the eurozone. Its membership in the European Union is also at stake.
But markets bounced back Tuesday in Asia, and European indexes pared earlier losses after steep sell-offs in those regions helped push the Dow down 350 points in the prior session — its biggest one-day-point loss since June 20, 2013.
On Tuesday, U.S. markets shot higher in early trading, possibly buoyed by reports that a last-minute deal may, against the dominant crisis narrative of the last 48 hours, slowly be coming together.
Citing unnamed government sources, Greece's Ekathimerini newspaper reported Tuesday that Athens is reconsidering a previous proposal by European Commission President Jean-Claude Juncker. No details were provided.
A Greek eurozone exit, it is feared, would reignite the financial contagion experienced during the sovereign debt crisis when billions of dollars were wiped off the value of European government debt and other assets.
Still, while many analysts and officials have warned that Greece leaving the eurozone could have far-reaching consequences for economies and markets across the world, the specific impact of that possible development remains mostly unclear.
"If Greece leaves the eurozone, there is unlikely to be a big bang moment when the country adopts the drachma (the currency it used prior to adopting the euro in 2001)," said Mark Zandi, chief economist at Moody's Analytics, a unit of the ratings firm.
"It will happen over time, as the Greek government issues IOUs that effectively become the new currency," he said.
Greek Prime Minister Alexis Tsipras hinted Monday he may resign if his nation votes "Yes" in the referendum Sunday. Tsipras' leftist Syriza party insists the vote is being called to strengthen its negotiating mandate with its creditors.
"If the Greek people want to proceed with austerity plans in perpetuity, which will leave us unable to lift our head, we will respect it, but we will not be the ones to carry it out," he said on Greek television late Monday.
European leaders including Italian Prime Minister Metteo Renzi and French President Francois Hollande dispute that. They say that Sunday's vote will effectively be a referendum on whether Greece wants to remain part of the eurozone.
Greek banks are closed as the government limited cash withdrawals to about $68 per day in a bid to stave off bank runs and keep its financial system from collapsing.
Protesters from both the "Yes" and "No" camps have held rallies in Athens.
