Greek government interest rates – which reflect the likelihood that investors attach to a future sovereign default – soared as soon as markets opened on Monday. There were also ominous signs of financial contagion across the single currency, as the interest rates of Greece’s potentially vulnerable eurozone neighbours such as Italy, Spain and Portugal also shot up.
Stock markets across Europe also fell, with almost 5 per cent wiped off Greek shares by increasingly worried investors.
The Greek negotiating delegation met representatives of creditors for just 45 minutes in Brussels on Sunday night before storming out. The negotiating team of the International Monetary Fund, which is also a creditor of Greece, flew out of Brussels last week, saying it was pointless to stay while the two sides remained so far apart.
Greece must repay €1.6bn to the IMF on 30 June or find itself in a technical sovereign default. That could prompt the European Central Bank to cut off an emergency lifeline to Greece’s banks, which would cause an instant financial meltdown and very probably force Athens to impose capital controls.
Many analysts expect that such controls would inevitably lead to Greece exiting the eurozone.
The European Central Bank’s president Mario Draghi described the prospect of a Greek default as “uncharted waters”.
European finance ministers are due to meet in Luxembourg on Thursday to decide whether Greece is offering enough reform for them to approve the release of funds. “This could well prove to be the last realistic chance of reaching a deal,” said Adam Chester of Lloyds Bank.
Athens is being told by creditors to raise the national retirement age, curb pension payouts and commit to running a significant budget surplus for the foreseeable future. But the Greek government is refusing to sign up to this package of demands, insisting that to do so would be to break the key promises upon which it was elected in January.
The response of the European Central Bank will be of paramount importance if Greece does default on 30 June. Mr Draghi, speaking at the European Parliament in Brussels, said: “The ball lies squarely in the camp of the Greek government”.
Greek premier Alexis Tsipras has accused Europe’s creditor powers of trying to subvert Greece’s elected government after five years of “pillaging”, warning in solemn terms that his country will defend its sovereign dignity whatever the consequences.
The defiant stand came as the European Commission lashed out at the Greeks and warned that the country would collapse into a “state of emergency” unless there is a deal to avert a financial crash.
Germany's EU Commissioner Guenther Oettinger said the creditor powers must draw up urgent plans to cope with social unrest in Greece and a break-down of energy supplies and medicine as soon as July.
In a terse statement, Mr Tsipras called on the EU institutions and the International Monetary Fund to “adhere to realism”.
He accused the creditors of “political motives” for demanding further pension cuts, hinting that their real goal is to destroy the credibility of his radical-Left Syriza government and force regime change.
“We are not only carrying a historical past underlined with struggles. We are carrying our people's dignity as well as the aspirations of all Europeans. We cannot ignore this responsibility. It has to do with democracy,” he said.
Germany’s Suddeutsche Zeitung reported that the creditors are drawing an ultimatum to the Greeks, threatening to cut off Greek access to the European payments system and forcing capital controls on the country as soon as this weekend. The plan would lead to the temporary closure of the banks, followed by a rationing of cash withdrawals.
The suspicion in Athens is that the creditors are deliberately engineering a Greek political crisis in what amounts to an arms-length coup d’etat, an allegation dismissed as absurd in Brussels. The IMF says the Greek pension system gobbles up 16pc of GDP – one of the highest in the world – and must be brought under control before there can be any further money.
The mood is hardening in Berlin where Volker Bouffier, the deputy leader of the ruling Christian Democrats (CDU), said nothing more can be done for a country bent on its own ruin. “It’s awful for the Greek people but we can’t have the rest of European people paying for utterly mad behaviour,” he said.
In a crucial twist, the IMF’s chief economist Olivier Blanchard blamed both sides for the impasse, arguing that there was a limit to what Greece could bear and calling for significant debt relief to restore the country to viability. “A credible deal will require difficult decisions by all sides,” he said.
It is the first time that a senior IMF official has stated that Greece needs a haircut on its public debt – 180pc of GDP – implying direct losses for EMU taxpayers for the first time. The Fund pulled its Greek team out of Europe last week, letting it be known privately that it will not take part until the debt issue is confronted head on.
Iceland Recovering Fastest in Europe After Jailing Bankers Instead of Bailing them Out | The Daily Sheeple
Over the weekend the Pentagon announced their intention to store heavy weapons, tanks, Humvees, and Bradley Fighting Vehicles, in several Eastern European nations. Two of these nations, Estonia and Latvia, lie directly on the border with Russia. Such a move would be unprecedented, and is still subject to approval from Washington. A 1997 agreement with Russia currently prohibits the US from positioning these weapons and vehicles in Eastern Europe.
Russian General Yury Yakubov has since responded to the move “If US heavy hardware including tanks, artillery systems, or other fighting vehicles does appear in some Eastern European and Baltic countries, this would mark the Pentagon and NATO’s most aggressive step since the Cold War time of the past century.” and further added that “Russia won’t have anything else to do but bolster its forces and resources on the Western strategic theater of operations.”
Of course, The United States doesn’t have a monopoly on hot-headed military brass, that are currently refueling Cold War tensions. Yakubov himself publicly identified the US as the most significant threat to Russia last year, and suggested that they prepare themselves to launch a preemptive nuclear strike against the US and NATO in the near future.
Poland and the Baltic states, where officials say privately they have been frustrated the NATO alliance has not taken more decisive steps to deter Russia, welcomed the decision by Washington to take the lead.
But others in the region were more cautious, fearing their countries could be caught in the middle of a new arms race between Russia and the United States.
"If heavy military equipment, including tanks, artillery batteries and other equipment really does turn up in countries in eastern Europe and the Baltics, that will be the most aggressive step by the Pentagon and NATO since the Cold War," Russian defence ministry official General Yuri Yakubov said.
The Japanese Ministry of Defense is considering whether to shoot down Chinese drones if the PLA decides to carry out routine patrols over contested islands in the East China Sea, reports the Tokyo-based Kyodo News.
The islands, known as Senkaku to Japan, which controls them, are also claimed by China as Diaoyu and by Taiwan as Diaoyutai.
An article from an official PLA magazine published last October suggested that the Chinese military is planning to carry out routine aerial patrols over the islands. It stated that coast guard vessels alone cannot defend China's sovereignty claims and the air defense identification zone set up by Beijing over the East China Sea. The PLA has an estimated 50 unmanned aerial vehicles, according to the report.
China deployed drones for island patrols for the first time in 2013 and has determined to carry out routine aerial patrols using drones as a response to US drone activities over the East China Sea. The US Air Force has deployed two of its RQ-4 Global Hawk unmanned aerial vehicles to Okinawa to monitor Chinese naval activities in the region. China has tried several times to jam the American drones flying over the disputed airspace, said the report.