ATHENS, Greece -- Greece slipped deeper into a financial abyss Tuesday after the bailout program it has relied on for five years expired and the country failed to repay a loan due to the International Monetary Fund.
Failure to make the $1.8 billion payment to the IMF made Greece the first developed country to fall into arrears on a fund loan. And the expiration of the bailout program means Greece lost access to more than $18 billion in financial support it has not yet tapped, officials said.
After Greece made a last-ditch effort to extend its bailout, eurozone finance ministers decided in a teleconference late Tuesday that there was no way they could reach a deal before the deadline.
"It would be crazy to extend the program," said Dutch Finance Minister Jeroen Dijsselbleom, who heads the eurozone finance ministers' body known as the eurogroup. "So that cannot happen and will not happen.
"The situation in Greece is deteriorating rapidly as a consequence of their own political choices," Dijsselbloem told reporters.
Greece suffered its second sovereign downgrade in as many days Tuesday when the Fitch ratings agency lowered it further into junk status, to just one notch above the level where it considers default inevitable.
The agency said the breakdown of negotiations "has significantly increased the risk that Greece will not be able to honor its debt obligations in the coming months, including bonds held by the private sector."
Fitch said it now considered a default on privately held debt "probable."
Stock markets in Europe reacted to the crisis with a negative day of trading despite some hope in continuing negotiations. The Stoxx 50 index of leading European shares fell 1.3 percent. Germany's DAX dropped 1.2 percent, and the CAC-40 in France fell 1.6 percent. The Greek stock market remained closed.
Even though the standoff in Greece is far-removed from the U.S., the global nature of financial markets will ensure that any ripple effects will be felt across the Atlantic, said Mike Ryan, chief investment strategist at UBS Wealth Management Americas.
"There are obvious concerns that failure to reach some kind of an agreement could put Greece on a path to a eurozone exit," said Ryan. "If there is going to be volatility in global markets, it will be reflected in U.S. markets as well."
Despite Monday's slump, many investors remain confident the U.S. economy will sustain its economic recovery.
"Whatever happens here, even if it's the worst case scenario and Greece drops out [of the euro], the pullback probably wouldn't be gigantic," said Scott Wren, a senior global equity strategist at the Wells Fargo Investment Institute.
The U.S. stock market recovered a bit Tuesday with the Dow Jones industrial average rising 23.16 points, or 0.1 percent, to 17,619.51. The Dow fell 350 points on Monday.
The brinkmanship that has characterized Greece's bailout negotiations with its European creditors and the IMF intensified over the weekend when Prime Minister Alexis Tsipras announced he would put a proposal by creditors to a referendum this Sunday and urged a vote of no.
The move increased fears the country could soon fall out of the euro currency bloc and Greeks rushed to pull money out of ATMs, leading the government to shutter its banks and impose restrictions on banking transactions on Monday for at least a week.
But in a surprise move Tuesday night, Deputy Prime Minister Yannis Dragasakis hinted that the government might be open to calling off the popular vote, saying it was a political decision.
The government decided on the referendum, he said on state television, "and it can make a decision on something else." It was unclear, however, how that would be possible legally, as Parliament has already voted for it to go ahead.
Hopes for a last-minute deal were raised when the Greek side announced it had submitted a new proposal Tuesday afternoon, and the eurozone's 19 finance ministers held a teleconference to discuss it.
But those hopes were quickly dashed.
German Chancellor Angela Merkel said she ruled out further negotiations with Greece before Sunday's popular vote on whether to accept creditors' demands for budget changes.
"Before the planned referendum is carried out, we will not negotiate over anything new," the dpa news agency quoted Merkel as saying.
Greece's latest offer involves a proposal to tap Europe's bailout fund -- the so-called European Stability Mechanism, a pot of money set up after Greece's rescue programs to help countries in need.
Tsipras' office said the proposal was "for the full coverage of [Greece's] financing needs with the simultaneous restructuring of the debt."
Dijsselbloem said the finance ministers would "study that request as we should" and that they would hold another conference call today, as they had also received a second letter from Athens that they had not had time to read.
Dragasakis said the new letter "narrows the differences further."
"We are making an additional effort. There are six points where this effort can be made. I don't want to get into specifics. But it includes pensions and labor issues," he said.
European officials and Greek opposition parties have been adamant that a no vote on Sunday will mean Greece will leave the euro and possibly even the European Union.
The government says this is scaremongering and that a rejection of creditor demands will mean the country is in a better negotiating position.
In Athens, more than 10,000 yes-vote supporters gathered outside Parliament despite a thunderstorm, chanting "Europe! Europe!" The protest came a day after thousands of government supporters advocating a no vote held a similar demonstration.
The late IMF payment will cut Greece off from new loans from the organization. Greece is not technically in default -- the IMF said Greece is in "arrears" -- but the missed payment is another warning that the country will probably be unable to meet its other obligations in coming weeks to its bond holders and to the European Central Bank.
Jacob Funk Kirkegaard, a senior fellow at the Peterson Institute for International Economics in Washington, said delinquency puts Greece in ignoble company.
"They are joining countries we would normally regard as failed and failing states," Kirkegaard said. "The symbolism is quite dramatic."
The missed payment is the largest in the history of the IMF, which was conceived during World War II to coordinate monetary policy and promote exchange-rate stability. Nations that miss IMF payments are ineligible for further funds as long as they are in arrears. The lender's procedures for dealing with overdue borrowers stretch over two years and culminate in potential expulsion from the fund's membership.
The last nation to miss an IMF payment was Zimbabwe in 2001.
On the streets of Athens, long lines formed again at ATMs as Greeks struggled with the new restrictions on banking transactions. Under credit controls imposed Monday, Greeks are now limited to ATM withdrawals of about $66 a day and cannot send money abroad nor make international payments without special permission.
Information for this article was contributed by Elena Becatoros, Raf Casert, Steve Rothwell, Derek Gatopoulos and Geir Moulson of the Associated Press, Jack Ewing and James Kanter of The New York Times and Rebecca Christie, Ott Ummelas and Corina Ruhe of Bloomberg News.
A Section on 07/01/2015