At midnight Central European time, Greece missed its deadline for a €1.6 billion (£1.13) payment to the International Monetary Fund (IMF).
This came just hours after eurozone ministers refused to extend the bailout – but ministers say they will discuss a last-minute request from Greece for a new two-year bailout on Wednesday.
This is the first time an "advanced country" has failed to repay a loan to the IMF, reports the BBC. The country is now formally in arrears.
Shortly after the missed deadline, the IMF confirmed that Greece had failed to make its payment.
"We have informed our Executive Board that Greece is now in arrears and can only receive IMF financing once the arrears are cleared" said spokesman Gerry Rice.
Mr Rice also confirmed that the IMF had received a request from Greece to extend the payment deadline. He commented that this would go to the board "in due course".
On Wednesday morning (July 1st), nearly 1,000 banks re-opened so that pensioners without bank cards could make a one-off withdrawal of up to €120.
The European Central Bank (ECB) has frozen its liquidity lifeline to Greek banks. Banks in the Mediterranean country are not expected to open again until July 7th. Yesterday, long queues formed at bank machines as people made withdrawals – a cap has been imposed of just €60 per day.
A possible 'Grexit'
Greece's failed repayment has sparked fears that the country could be at risk of leaving the euro.
Experts recon that if the country can't repay its debt to the ECB on July 20th, it would probably spell the end for Greece as an EU member, the BBC reports.
Part of the new deal Athens has proposed involves a restructuring of its debts. But this proposal will likely be unacceptable fo other eurozone countries.
Dutch finance Minister Jeroen Dijsselbloem – who is also the eurogroup chairman - remarked that it would be "crazy" to extend the Greek bailout beyond its deadline since Athens was refusing to accept the proposals put before it.
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