Greek debt default is now inevitable, government officials say prepare now for systemic collapse

(NaturalNews) We have been tracking and reporting on the worsening economic situation in Greece now for more than a year, and it appears as though our earlier predictions – that the broke Mediterranean nation would eventually default on bailout loans it received in 2012, under different leadership – will happen.

Reuters reported Monday that Greece will not pay a 1.6 billion-euro installment it owes on its loan that is due June 30, according to a Greek government official who confirmed the default yesterday, further highlighting the overall severity of the country's financial crisis.

The warning did not come as a surprise to some, as Greek officials have said repeatedly in the weeks running up to the June 30 deadline that the country would not have the money to make its payment to the International Monetary Fund. Greece's socialist prime minister, Alexis Tsipras, had been in negotiations with creditors, but banking cartels and related media claim that he has not entertained or offered realistic options for paying the country's debts.

Tsipras sought release of €7.2 billion in bailout funds that have been frozen while the two sides talked, but EU and IMF officials balked.

Greeks expected to approve referendum

As reported Monday by The Wall Street Journal, Greek citizens have been making runs on banks, with ATMs running out of cash, in a bid to secure their funds, as the likelihood of a deal seems increasingly remote.

In response, the Tsipras government announced that the Greek central bank will move to impose capital controls to prevent further flights of cash out of the country's banks. Also, the government said banks would close Monday and remain closed for six days, as a way of preventing a battered banking system from collapsing altogether.

The Greek financial drama is having an effect worldwide. Stock markets from around the world fell on news that a default was likely; the Dow Jones fell some 300 points Monday as gold and U.S. Treasuries strengthened on investors' moves to safety.

Further, the WSJ reported:

Over the weekend, Greek Prime Minister Alexis Tsipras shocked European policy makers by announcing the country will hold a referendum on whether to accept the terms of Greece's creditors to unlock desperately needed financial aid.

That vote occurs July 5, five days after an official default.

The paper further noted that a Greek default would raise a number of questions, such as whether it would remain a viable country, whether the euro would survive an inevitable Greek exit, and whether the European Continent, addicted to cheap credit, miscalculated in believing that all monetary risks could be contained.

Bloomberg News reported that the decision to impose capital controls was announced "in the dead of night," and that Greeks awoke to it Monday morning, stunned.

The controls limit daily withdrawals to €60 (about $67) and they also ban cash transfers abroad.

In announcing the referendum, Tsipras struck a defiant tone. He tweeted, "The recent decisions of the Eurogroup & ECB have only one objective: to attempt to stifle the will of the Greek people. #Greece"

Socialist economic model

Economists said that, going forward, Greek investments were not a smart move.

"A Greek exit has become our base case, which means the risk premia for holding European assets are going to increase," Hans Redeker, global head of currency strategy at Morgan Stanley, told Bloomberg News. "The European Central Bank will have to act against that."

Tsipras, who promised to return "dignity" to the Greek people while rejecting budget cuts called for by creditors, appealed for citizens to remain "calm" over the weekend. But the markets were anything but, as reported by Bloomberg News:

The Euro Stoxx 50 Index fell 3.3 percent at 12:10 p.m. in Athens. Greek 10-year notes plunged by the most since at least 1998, driving the yield to 14.6 percent, the highest since December 2012. German bunds rose the most since 2011, sending the 10-year yield to 0.77 percent.

Critics of Greece blame the country's socialist economic model, in which a shrinking number of producers, for too long, have been expected to subsidize too many non-producers, via overly generous social welfare programs.

Sources:

http://blogs.wsj.com

http://news.yahoo.com

http://www.bloomberg.com