The exchange between the chief antagonists marked the latest chapter of the crisis as Greece failed to make a payment of about €1.5 billion ($2.2 billion) to the global lender of last resort, joining the historical ranks of deadbeats from Cuba to Zimbabwe. The Greek vote, which leaders in Berlin and Paris have labeled a decision on remaining in the euro, could also determine whether the European Central Bank withdraws its emergency loans. That would further decimate an economy that's already shrunk by about a quarter in five years. "A 'no' in the referendum would make it almost impossible for the IMF and for Europe to provide support for Greece beyond what would de facto be humanitarian relief," said Holger Schmieding, chief economist at Berenberg Bank in London. "Greece would then have to issue IOUs as a first step to a Grexit." More brinkmanship? Tsipras's plan would cover all the country's financing needs for two years. It failed to include any economic-reform measures and proposed a restructuring of Greece's crushing debt load, spelling its likely rejection.

Euro-area finance ministers, who discussed the plan in a conference call, will examine it on another one at 11:30 am Brussels time Wednesday (7:30pm Sydney time). Their comments suggested they were open to compromise, though they stuck by their opposition to debt relief and demands for economic reform. On first look, the plan appeared to be a non-starter, according to three officials. In an effort to get talks on track, Greece has agreed to offer more information and said that Greece might change its referendum terms and recommendation, another official said. "It strikes me as just another brinkmanship tactic," said Ben May, an economist at Oxford Economics in London. "It could arguably be the starting point for bringing Greece back from the brink, but it's going to be a pretty bumpy ride." Capital controls On the second day of capital controls, the stress is beginning to show among Greeks, who are limited to €60 ($87) a day of withdrawals. The union for National Bank of Greece workers appealed for a police presence in the next three days at branches open for the payment of pensions.

For now, at least, markets suggest investors are confident in policy makers' efforts to quarantine Athens during more than five years of crisis fighting and two bailouts. The euro is trading at $US1.114, about the same as before negotiations collapsed on June 26. Bonds rose in Spain, Portugal and Italy, which sold €6.8 billion of debt on Tuesday. The latest twists are unlikely to be the last. German Finance Minister Wolfgang Schaeuble told lawmakers in Berlin that Greece would stay in the euro for the time being even if Greek voters reject austerity in the referendum, according to three people present. "This week is going to be very psychologically tense, very emotional," said Othon Anastasakis, a professor of European politics at the University of Oxford. "There are going to be various arguments from both sides."\

IMF confirmed default Greece is now in arrears, International Monetary Fund spokesman Gerry Rice confirmed after the deadline of 8am on Wednesday, Sydney time, passed for Greece's €1.5 billion payment, coinciding with the expiration of the nation's bailout from euro-area nations. The missed payment, the largest in the Washington-based IMF's history, is equivalent to a default, in that both terms imply a breach of Athens' obligations, Mr Rice said. Greece can now only receive further IMF funding once the arrears are cleared. Mr Rice confirmed that Greece had asked for a last-minute repayment extension earlier on Tuesday, which the fund's board will consider "in due course".

Klaus Regling, the head of the main euro-area bailout fund, has said it has the option of demanding accelerated debt payments from Greece if it doesn't pay the IMF. "A default on the IMF does not guarantee Grexit," David Stubbs, global market strategist at JPMorgan Asset Management in London, said in a note to clients. If Greeks vote "yes" to an agreement with creditors in Sunday's referendum, "we think it's still more likely than not that Greece will remain in the euro. But the probability of an exit from the single currency - accidental or otherwise - is now higher than it was." The three major credit-rating companies have said failure to pay the IMF would not constitute a default because that term is reserved for private-sector creditors, and the IMF avoids the word. The missed payment by Greece is the largest in the history of the IMF, which was conceived during World War II to co-ordinate 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. Reuters, Bloomberg