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Greece Has Until the End of Today to Submit Final Debt Proposal

If Prime Minister Alexis Tsipras does not come up with a proposal by the end of the day that creditors accept, Greece's banking system will almost inevitably collapse and it could soon exit the euro.

by VICE News
Jul 9 2015, 11:50am

Photo by Geert Vanden Wijngaert/AP

It's the last chance saloon for Greece. The country has until the end of Thursday to come up with a final bailout proposal and prevent a possible exit from the eurozone. If it fails to come up with a plan its European partners accept, a potentially catastrophic "Grexit" could happen within days.

Prime Minister Alexis Tsipras is meeting finance ministry officials to finalize a plan of reforms that he will offer to make in return for bailout funds. Eurozone finance ministers will meet on Sunday to make a decision on his proposals.

If Tsipras does not get a deal, Greece faces an almost inevitable collapse of the banking system, which would be the first step for the country to fall out of the euro. 

Christian Noyer, a member of the decision-making governing council at the European Central Bank — which has put 89 billion euros ($98bn) into the Greek financial system in recent months to keep it afloat but says it will pull the plug if there is no agreement on Thursday's offer — told French radio on Wednesday this was the last chance to avoid catastrophe. 

"There must be an agreement next Sunday [July 12] at the very latest," he said. "After that it will be too late and the consequences will be grave. I fear that if there is no agreement on Sunday the Greek economy will collapse and there will be chaos."

Watch the VICE News documentary: Yes or No? Greece Again on the Brink: Greek Debt Crisis (Dispatch 1)

For months, Greece and its international creditors — the International Monetary Fund (IMF) and other European states — have been in deadlock over what reforms the country must make, with Tsipras' proposals repeatedly rejected.

Greece's last bailout agreement ran out on June 30 and the country defaulted on a $1.7 billion debt repayment to the IMF. Creditors want Greece to limit access to early retirement and raise sales tax to 23 percent nationwide, among other reforms.

But the Greek population overwhelming rejected the idea of accepting the austerity measures demanded by the creditors in a referendum on July 5.

Related: Financial Chaos Looms After Greeks Reject Bailout With Resounding 'Oxi' Vote

The last-minute negotiations come amid bank closures in Greece, where capital controls have been imposed that restrict Greeks to cash withdrawals of 60 euros ($67) per day. The closures have been extended through Monday.

Pensioners without bank cards have been particularly hard hit as they have struggled to access their accounts. Certain bank branches opened last week to allow them to withdraw a weekly allowance of 120 euros each.

The government announced on Wednesday that this was being renewed so they could withdraw the same sum. Hundreds of elderly Greeks lined up outside banks on Thursday morning.

After months of fruitless negotiations with Tsipras' government, elected in January on promises to repeal bailout austerity, the skeptical eurozone creditor states have said they want to see a detailed, cost-accounted plan of the reforms Greece will make.

But the country's major creditors disagree on key aspects of how to deal with the struggling but defiant European Union member. 

IMF chief Christine Lagarde reiterated on Wednesday that Greece's massive debt would need restructuring, something that Germany — Greece's largest European lender — has resisted.

Germany insists Greece must pay its debts in full or get cut off from eurozone funds. France, its second-largest European lender, says the country should get debt relief as part of a bail-out.

US Treasury Secretary Jack Lew added pressure on the European lenders on Wednesday, arguing debt relief was needed for a deal — and describing a Greek exit from the eurozone as a "geopolitical mistake."

Related: Some Nostalgic Greeks Want to Quit the Euro and Bring Back Their Old Currency

The Associated Press contributed to this report.