Brussels: The board of directors of the European Financial Stability Facility (EFSF) on Friday decided to reserve its rights on EFSF loans to Greece, after the non-payment by Greece to the International Monetary Fund (IMF).
The EFSF is eurozone’s rescue fund and Greece’s biggest creditor.
According to a statement released by EFSF, the EFSF board of directors decided not to request immediate repayment of its loans nor to “waive its right to action”, meaning it may act in a later stage to call in the outstanding loans to Greece, Xinhua news ageny reported.
The decision was made only two days before a Greek referendum over whether to accept the creditor’s bailout terms. Eurogroup head Jeroen Dijsselbloem said a “No” vote would question whether Athens still had a place within the eurozone.
“This event of default is cause for deep concern. It breaks the commitment made by Greece to honour its financial obligations to all its creditors, and it opens the door to severe consequences for the Greek economy and the Greek people,” EFSF’s CEO Klaus Regling said in the statement.
A repayment of about 1.5 billion euros ($1.6 billion) was due to the IMF on June 30. Greece did not make the repayment when due and is now in arrears to the Washington-based lender, which makes Greece the first advanced economy to default on IMF debt.
“The EFSF will closely coordinate with the euro area member states, the European Commission, and the IMF on its future actions,” Regling added.
The statement said Greek non-payment has no influence on the EFSF’s capacity to repay its bondholders, because “investors know that EFSF bonds benefit from a robust guarantee structure”.
The EFSF board of directors is composed of deputy finance ministers and senior officials of each EFSF member.
The EFSF was created as a temporary crisis resolution mechanism by the euro area member states in June 2010. The EFSF has provided financial assistance to Ireland, Portugal and Greece, and will not provide financial assistance to any further countries.
The assistance was financed by the EFSF through the issuance of bonds and other debt instruments on capital markets. The final ongoing EFSF assistance programme (for Greece) expired on June 30, 2015.