Tuesday 30 June 2015
Germany, France and Italy joined the European commission in insisting that Sunday’s poll is about continued Eurozone membership
The Eurozone's three biggest countries have raised the stakes in next Sunday’s Greek referendum with an orchestrated warning to voters that a no vote would mean exit from the single currency and the return of the drachma.
As the Greek economy suffered on its first day of stringent capital controls, politicians from Germany, France and Italy joined the European commission in insisting that the poll was not about whether Athens could secure more favourable bailout terms but was about continued euro membership.
The stark assessment was shared by George Osborne who told MPs that the UK economy would be affected by the chaos that would result from Greece leaving the Eurozone.
The chancellor’s comments came as ratings agency Standard & Poor’s issued a grim analysis of the repercussions that could follow an euro exit, the chances of which it has raised from 33% to 50%. S&P said there could be “a serious foreign currency shortage for the private and public sectors, potentially leading to the rationing of key imports such as fuel”.
The banks are closed, the bailout referendum is looming – and Europe’s only far-left government is struggling to hold on to its mass support. In less than a week, it will either be triumphant or finished
S&P added that without continuing European Central Bank support for Greek banks, the country’s “payment system would shut down and its banks would not be able to operate”.
Eurozone leaders sought to exploit pictures of cashpoint queues and empty Athens restaurants to stress what was at stake if Greeks supported the decision of their prime minister, Alexis Tsipras, to reject the fresh austerity measures being demanded by the country’s creditors for continued financial support.
At the end of a day that saw sharp falls in share prices around the globe, Tsipras used a TV address to ask a public still stunned by the imposition of a €60 daily limit on bank withdrawals to back his resistance to a new round of tough tax increases and spending cuts demanded by the troika of the commission, the ECB and the International Monetary Fund.
Tsipras urged Greeks to vote no in the forthcoming referendum, saying the plebiscite would be a strong “negotiating tool” in talks with lenders. Denying that Greece had walked away from negotiations, he told state-run TV: “The greater the number of no [votes], the greater the weapon the government will have to relaunch negotiations. Greece never left the negotiating table, it is still at the negotiating table. ”
Appearing by turns combative and nervous, the 40-year-old leader suggested, for the first time, that he and his radical left Syriza party would resign if the yes vote triumphed in the referendum.
“We will respect the result but we will not be there to serve it,” he told the station.
Greece’s international creditors clearly did not want a no vote because they wanted to kill “the hope” of enacting policies against austerity, he claimed. “They want to kill democracy in the place where it was born,” he said, adding that the “negative decision” to close banks was aimed squarely at thwarting Sunday’s vote.
“Greek people have experienced more difficult moments and they will survive,’ he said.
With polls showing Greeks in favour of remaining inside the Eurozone, the Greek government made no mention of exit from the single currency in the wording of Sunday’s referendum. This will ask Greece whether they support the “plan of agreement” drawn up by the troika and will put the no option Tsipras wants at the top of the ballot paper.
The publication of the wording coincided with Greece admitting that it would not meet the Tuesday deadline for making a €1.6bn (£1.1bn) payment to the IMF in Washington and new evidence of the parlous state of Greek banks following the referendum announcement. It emerged that the Bank of Greece asked in vain for the ECB to increase its emergency funding by €6bn in order to cover panic withdrawals.
Caught between a history of resistance and defiance and fears of being cast out of the Eurozone, Greeks are facing a dilemma of immense proportions
Sigmar Gabriel, Germany’s vice-chancellor, voiced concerns that a so-called Grexit could start to unravel six decades of closer integration. He said the crisis was the most serious faced by Europe since the signing of the Treaty of Rome in 1957. He added that if the Greeks voted no on Sunday, they were voting “against remaining in the euro”.
He was supported by French president François Hollande, who came under strong pressure from US president Barack Obama to find a solution to the deepening crisis before it caused more damage to a still-fragile global economy. Hollande said: “It’s the Greek people’s right to say what they want their future to be. It’s about whether the Greeks want to stay in the Eurozone or take the risk of leaving.”
Jeroen Dijsselbloem, the chairman of the Euro group of finance ministers from the 19 nations using the single currency, said the door was still open for negotiations to resume despite time running out before Sunday’s referendum.
But the hardening stance among Greece’s partners was evident from a tweet by Matteo Renzi, Italy’s prime minister and hitherto seen as one of the European leaders closest to Tsipras. The referendum, Renzi said, was not a question of the commission versus Tsipras but of “the euro versus the drachma. This is the choice”.
Jean-Claude Juncker, the commission president, said: “It’s the moment of truth ... I’d like to ask the Greek people to vote yes ... No would mean that Greece is saying no to Europe.”
In a sign of how relations have been soured by last week’s rejection of what was seen by Tsipras as a take-it-or-leave-it final offer, Juncker accused the Greek prime minister of telling lies about the proposals and said they did not include plans to cut pensions. A government spokesman in Athens accused Juncker of telling a “preposterous lie”.
Germany’s vice-chancellor has become the first senior EU politician to voice the private views of many - that the Greek PM is a threat to the European order
Greece’s stock market was closed but a share price fall that began in Asia spread to Europe and later the US. London’s FTSE 100 lost almost 2% of its value, with drops of 3.5% in Frankfurt and 3.7% in Paris. New York’s Dow Jones Industrial Average was down 2%, the biggest one day decline this year, while the Nasdaq tumbled 2.4%. The euro slid to its weakest level against the pound since 2007 and now stands at almost €1.40 to the pound. Twelve months ago it was trading at €1.25.
On global markets, the interest rate on Greek 10-year bonds rose by four percentage points to 15%, a sign that financial markets fear the country’s days in the euro are numbered. About 850 Greek banks could open for business on Thursday in order to pay pensions, the government said.
Osborne said British holidaymakers travelling to Greece should carry enough cash for the whole trip and to cover emergencies. After the chancellor held a contingency meeting with David Cameron and the governor of the Bank of England, Mark Carney, he said he was “hoping for the best but preparing for the worst”.
The chancellor said British taxpayers could be liable for hundreds of millions of pounds if Greece fell out of the Eurozone and relied on an emergency loan scheme supported by the EU’s budget which is funded by all 28 member states.
He said that an early decision by the coalition government was to exempt the UK from Eurozone bailouts, dramatically reducing the “direct exposure” of the UK. But Osborne added: “Of course we are part of the financial system of Europe and we will be affected if there is a Greek exit.”
The chancellor’s remarks referred to the EU’s balance of payments support system which is open to non-Eurozone members of the EU. The scheme has been used in recent years to release billions of euros to Romania, Hungary and Latvia when they were hit by the global financial crash.
If Greek falls out of the euro, it is expected that the IMF would become its main lender of emergency. Under the arrangements for Hungarian and Romanian, the EU balance of payments scheme provided about 40% of their loans.