What was once considered unthinkable has now happened. Having missed the June 30th deadline for payment on its debt, the country of Greece has effectively defaulted. This is going to have a considerable effect on the economy of the European Union, which Greece might now leave.

It’s likely that this situation will get worse before it gets better. First, the basic facts.

Michael Birnbaum of the Washington Post:

Greece fails to make key IMF debt payment

Greece lost its financial lifelines Tuesday, as the country missed a crucial payment to the International Monetary Fund amid growing questions about whether it would be able to remain in the euro zone.

Greek leaders had made a last-ditch attempt to come up with the necessary cash, asking European countries for a new bailout hours before its last ones were set to expire, but E.U. finance ministers rejected the request as unrealistic. The missed payment, confirmed by the IMF, was a landmark moment in Europe’s five-year battle to preserve its common currency.

The E.U. finance chiefs were set to reconvene Wednesday as Greece’s cash dwindles and its banks remain closed. The ministers’ decision to hold firm was a sign that they believed they had successfully put in place the defenses­ against instability in Europe if a country left the euro zone. But as Greece became the first developed nation to miss a payment to the IMF, E.U. leaders were confronting the prospect of a European country plunging into intense financial misery as it was forced to abandon the currency.

In the coming days, you’re going to hear some quibbling about whether or not this was a default.

Case in point, the New York Times:

Greece, Missing I.M.F. Payment, Is Called Effectively in Default

ATHENS — Greece missed a crucial debt payment to the International Monetary Fund, the fund said early Wednesday, deepening a crisis that has haunted world leaders and financial markets over the past week.

The development came as Greece’s European creditors each rejected an 11th-hour attempt by Athens to extend the country’s international bailout program.

Greece is not technically in default, but missing the payment of 1.5 billion euros, or about $1.7 billion, is yet 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. That might make the bank, one of the country’s chief creditors, less willing to continue emergency loans that have been propping up Greek banks for the past several months.

By declaring Greece in arrears, the I.M.F. avoided using the term “default.” Credit rating agencies also will not consider Greece in default based on missing the I.M.F. payment, because the I.M.F. is not considered a commercial borrower.

People can call this crisis whatever they want, but the truth is that this is a huge deal, no matter how it’s labeled.

Predictions will abound, but as the CBC notes, we’ve never been here before:

Greece in uncharted territory as it defaults on IMF loan

The financial crisis unfolding in Greece is unprecedented, and few experts are prepared to speculate on just what might happen next now that the country has defaulted on one of its many sizeable debts.

“We’re now into territory that no one has a map for and there are no instructions for, and, you know, [that] no one has a very good plan for,” and Phil Triadafilopoulos, an associate professor of political science at the University of Toronto.

CNN echoed that sentiment in a report last night:

The worst news in all of this comes from Jason Russell of the Washington Examiner:

U.S. debt headed toward Greek levels

United States’ projected debt over the next 25 years looks a lot like Greece’s over the past 25.

With all the chaos unravelling in Greece, Congress would be wise to do what it takes to avoid reaching Greek debt levels. But it’s not a matter of sticking to the status quo and avoiding bad decisions that would put the budget on a Greek-like path, because the budget is on that path already.

A quarter-century ago, Greek debt levels were roughly 75 percent of Greece’s economy — about equal to what the U.S. has now. As of 2014, Greek debt levels are about 177 percent of national GDP. Now, the country is considering defaulting on its loans and uncertainty is gripping the economy.

In 25 years, U.S. debt levels are projected to reach 156 percent of the economy, which Greece had in 2012. That projection comes from the Congressional Budget Office’s alternative scenario, which is more realistic than its standard fiscal projection about which spending programs Congress will extend into the future.

If Congress leaves the federal budget on autopilot, debt levels will soar. Instead, spending must be reined in to avoid a Greek-style meltdown.

Zero Hedge claims that Greece’s nightmare is just beginning, but I’d like to leave you with a tweet from Iowahawk who summed up the situation with his usual eloquence weeks ago:

Featured image via YouTube.