The Greek government is making one final throw of the dice. Just hours before Greece is set to default on its €1.55 billion payment to the IMF, Athens has proposed a new two year bailout from the Eurozone, funded by the European Stability Mechanism set up in 2012.
Asking for a third bailout within hours of the second one drawing to a close shows just how keen the Greek government is to remain in the Eurozone. But this does not mean they are giving into their creditors' demands. In a statement this afternoon, the Greek government said it still wants better terms:
‘From the first moment, we made clear that the decision to hold a referendum is not the end but the continuation of negotiations for better terms for the Greek people ... the Greek government will until the end seek a viable agreement within the euro.'
European leaders are set to discuss this proposal on a conference call later today but the prospects of success are poor. Crucially, Angela Merkel has said that Germany refuses to consider any deal until after Sunday’s snap referendum on the creditor's proposals. Although Alexis Tsipras, the Greek Prime Minister, has caught most EU watchers off guard with this last minute proposal, it still seems unlikely that Brussels will consider anything involving more borrowing without major economic reforms.
After kicking the can down the road over and over, it appears tonight will finally mark the crunch point for Greece. The Eurozone proportion of Greece’s €245 billion rescue deal runs out at 10pm London time and all of the signs suggest that Greece will default on its IMF loan. If this occurs, a Grexit becomes much more likely.
Even if the Greek government did acquiesce to the EU’s demands for major reforms at the last minute, it would have a significant impact on Tsipras' credibility and the result of the upcoming referendum. With reports of long queues at cash machines and banks remaining closed across the country, the Greek situation is moving into uncharted territory.