Greece seeks Eurogroup, ECB support after IMF default

Greece was appealing to its eurozone partners and the European Central Bank on Wednesday to keep it afloat after defaulting on its debt to the International Monetary Fund and losing frozen international bailout money.

Athens was due to put new proposals for a two-year loan agreement and a debt rescheduling to Eurogroup finance ministers after hinting that leftist Prime Minister Alexis Tsipras might be willing to scrap a referendum on bailout terms.

Finance Minister Yanis Varoufakis told colleagues the ruling SYRIZA party might even urge Greeks to vote "yes" in Sunday's plebiscite if Athens is granted a loan, participants said.

An opinion poll published on Wednesday showed the "no" camp in the lead after Tsipras urged voters to reject conditions he called humiliating, but it also showed the gap had narrowed after the government had to shut the banks and impose capital controls.

European Commission President Jean-Claude Juncker was engaged in intensive efforts to persuade the leftist Greek government to accept reform commitments close to those it rejected last week to avert an economic meltdown and possible exit from the eurozone.

The Eurogroup is due to hold a conference call at 1530 GMT on Wednesdsay.

However, there is deep skepticism among Greece's partners about any rushed deal to lend more money to a country that on Tuesday became the first advanced economy ever to default on the IMF, missing a 1.5 billion euro debt repayment.

In Germany, Greece's biggest creditor, a senior lawmaker in Chancellor Angela Merkel's conservative bloc accused Greece of misleading Europe and said it would be wrong to grant a loan now.

"All interim measures without conditionality, without reforms are not serious and no basis for talks," Hans Michelbach of the Bavarian Christian Social Union told Deutschlandfunk radio. "We should not go along with this deliberate game to sow confusion being played by the Greeks… Europeans should not be led up the garden path."

French Finance Minister Michel Sapin, who has been Greece's strongest sympathiser in the eurozone, told RTL radio: "The aim is to find an agreement before the referendum if possible… But it's dreadfully complicated."

"It isn't the Germans who are the toughest. It's the little countries that have made big sacrifices in recent years which are saying 'don't ask my people to help you again when my standard of living is lower than yours'," he said.

The ECB's policymaking governing council was to meet in Frankfurt to decide whether to maintain, increase or curtail emergency lending that is keeping Greek banks afloat despite a wave of deposit withdrawals and the state's default.

Germany's Bundesbank was leading hawks who argue that the ECB cannot go on providing funds through the Greek central bank as before to lenders that are backed by an insolvent sovereign.

One possible move would be to increase the "haircut" charged on Greek government bonds presented as collateral for funds in light of the IMF default.

Greek banks have been shuttered for the week, and cash withdrawals rationed to 60 euros a day after the ECB rejected a request at the weekend to increase liquidity assistance.

German Finance Minister Wolfgang Schaeuble, who has taken a hard line on Greece, took the unusual step of telling lawmakers he would advise the ECB not to raise liquidity to Greek banks, according to participants at a closed-door meeting. Berlin normally insists the central bank is independent and should not receive advice from politicians.

After Athens's peers rejected a last-ditch plea for an extension of its expiring bailout program on Tuesday evening, Eurogroup chairman Jeroen Dijsselbloem said Greece was welcome to ask for new aid but it would come with conditions.

"What can change is the political stance of the Greek government that has led to this unfortunate situation," Dijsselbloem told Reuters.

Thousands of pro-European Greeks took to Athens' central Syntagma Square outside parliament on Tuesday evening to demand a "yes" vote to the bailout deal.

Carrying signs with messages like "We will not become the last Soviet state" and chanting "Greece! Europe! Democracy!", the demonstrators braved heavy rain to rally in support of a "Yes" vote.

The demonstration matched a rally of similar size for the "No" camp a day earlier, as supporters of both sides sought to build up momentum before Sunday's referendum.

A poll by the ProRata institute published in the Efimerida ton Syntakton newspaper showed 54 percent of those planning to vote would oppose the bailout against 33 percent in favor.

However a breakdown of results between those polled before and after Sunday's decision to close the banks and impose capital controls showed the gap narrowing.

Of those polled before the announcement of the bank closures, 57 percent said they would vote "No" against 30 percent who would vote "Yes". However among those polled after, the "No" camp fell to 46 percent against 37 percent for "Yes".

From across the Atlantic, the United States said it was watching the situation closely and urged new talks to clinch a deal for Greece that would make its debt sustainable – a veiled reference to support for some form of debt rescheduling.

"The United States will continue to encourage all parties involved to press forward with negotiations that put Greece on a path toward economic growth within the Eurozone on the basis of needed economic reforms and requisite financing that achieves debt sustainability," a US Treasury statement said. [Reuters]