By Mehreen Khan 11 May 2015
Finance minister touts possibility of plebiscite as Greece gets no closer to striking deal with its partners
Athens has seen support for its negotiating strategy fall by nearly a third
The German government has raised the prospect of an in-out referendum to decide Greece’s fate in the single currency, in a sign that Europe’s largest creditor has begun to make contingency plans for a Greek exit from the euro.
Speaking ahead of a meeting of Eurozone finance ministers in Brussels, Germany’s Wolfgang Schaeuble said a plebiscite on Greece’s euro membership could prove to be “helpful” for the debt-stricken country and its creditors.
"If the Greek government thinks it must hold a referendum, then let it hold a referendum," said Mr Schaeuble.
"That might even be a helpful measure for the Greek people to decide whether it is ready to accept what is necessary, or whether it wants something different."
His comments represent something of a volte-face from Berlin, who famously quashed plans by then Greek prime minister George Papandreou to hold a referendum at the height of the country's debt crisis four years ago. Both Germany and France threatened to withdraw financial aid for Greece if a referendum was held in 2011.
Wolfgang Schaeuble met with his Greek counterpart before the euro group
The president of the European parliament, German Martin Schulz chimed in with the tacit endorsement, saying a referendum was a “possibility” but ultimately it would be up to the Greek government to decide.
Popular votes have not been the preferred course of action for European officials.
The people of the Netherlands and France voted to reject the EU Constitution in 2005, while Ireland also failed to initially ratify the Treaty of Lisbon in 2008.
Greek Prime Minister Alexis Tsipras campaigned to stay in the euro when his Leftist Syriza party stormed to power in late January. But after three months of fractious talks which have yielded little agreement, Greece stands on the brink of defaulting to its own people at the end of the month.
The government is expected to avoid defaulting to the International Monetary Fund on Tuesday as it makes a €750 loan repayment despite its cash reserves running dry.
Athens has however warned that it will not be able to fulfil obligations to its public sector workers without a fresh injection of bail-out money later this month. Greece’s next crunch date comes on June 5 when it faces a €300m IMF repayment.
The prospect of a referendum would however put a brake on the disbursement of creditor money as it would delay the implementation of reforms, warned Jeroen Dijsselbloem, president of the euro group.
Finance ministers from the 19-member bloc held talks in a more constructive atmosphere on Monday, compared to an ill-tempered meeting in Riga last month, but ultimately failed to produce a conclusive agreement to end Greece’s turmoil.
Pierre Moscovici, the Eurozone's economics chief, said Greece had made some progress towards bridging gaps over raising VAT and improving tax collection but remained had still not ceded ground on the critical stumbling blocks of labour market and pensions reforms.
“There is no time to be lost. We need an agreement to be in place before the end of June,” said Mr Moscovici.
Greece’s finance minister Yanis Varoufakis said there had been a “significant convergence" between the two sides in recent weeks due to his government's "major concessions".
However, he said a referendum was not on the country’s “radar”.
Polls from the country show the Syriza government maintains a healthy 15 point lead against its nearest rival party New Democracy. But in a sign that a possible referendum could falter, support for the government’s negotiating tactics has fallen from 80pc in February, to just under 55pc this month.