Greece on the verge of default as creditors reject aid extension

BRUSSELS — Europe’s long standoff over Greece’s debt moved into an unpredictable stage Sunday, with tensions reaching their highest levels yet and the risk growing rapidly that Greece could crash out of the European currency.

On Saturday, eurozone finance ministers meeting in Brussels rejected Greece’s request to extend its existing bailout program past a Tuesday deadline.

Greece wanted the extension so it could hold a national referendum next Sunday to let voters decide whether the country should accept bailout aid under terms the government of Prime Minister Alexis Tsipras bitterly opposes.

Addressing Parliament before the vote, Tsipras defended his decision to call a plebiscite, saying it would “honor the sovereignty of our people,” and called on Greeks to say a “big ‘no’ to the ultimatum,” referring to the creditors’ proposal for a deal.

After five months of grinding negotiations, Tsipras’ surprise referendum gambit — announced early Saturday on national television while many ordinary citizens were asleep — left unclear whether he was seeking a final bit of leverage for a last-minute deal or was essentially calling an end to the negotiations.

At the conclusion of the meeting Saturday, the eurogroup, in a statement, said the end of the current program “will require measures by the Greek authorities” to “safeguard stability of the Greek financial system” in what amounted to a thinly veiled reference to the need for Athens to plan on imposing capital controls to stem the flight of deposits.

Greece is rapidly running out of money and has been negotiating over a remaining installment of 7.2 billion euros, or about $8 billion, so Athens can avoid defaulting on some of its debt, including a payment of 1.6 billion euros due Tuesday to the International Monetary Fund.

Tsipras, who was elected this year on a platform of challenging the austerity policies that have defined the European response to seven years of economic trouble, has resisted some of the demands for additional cuts and accused the creditors — the eurozone countries, the European Central Bank and the International Monetary Fund — of humiliating the Greek people and imposing excessive hardship.