Sunday, June 28, 2015

Greece heads toward euro exit - Greek Parliament gives thumbs-up to historic referendum

By Zeke Turner and Matthew Karnitschnig 27/06/2015

Tsipras applauded by members of his cabinet, in the Greek Parliament | EPA

After more than 14 hours of emotional debate that stretched into Sunday morning, the Greek Parliament backed the prime minister’s decision to hold a historic public referendum for its citizens to decide between austerity and staying in the Eurozone or default and the consequences.

The measure passed 178 to 120, with two abstaining, setting the stage for a July 5 vote. The significance of their voices, however, appears increasingly insignificant.

Antonis Samaras, a former prime minister, described the referendum as a “coup attempt” that would end with “bankruptcy and euro exit” and leave Greece in a similar economic and financial position to Zambia.

But Alexis Tsipras, the Greek prime minister, bashed its creditors — led by the International Monetary Fund, the European Central Bank and the European Commission — for “not wanting us to reach deal but surrender our political dignity.”

He denounced the creditors’ proposal as offering no solution to his country’s crippling debt burden. Greece’s debt amounts to about 180 per cent of the value of goods and services the country produces each year, a level most economists agree is unsustainable and unrepayable.

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Opposition leader Antonis Samaras walks past Tsipras in the Greek Parliament

But it looks increasingly doubtful there will be any bailout program on offer by the time Greeks vote. The current rescue program expires June 30, and European finance ministers rejected Athens’ request for a month-long extension for time to hold the referendum.

“The current financial assistance arrangement with Greece will expire on 30 June 2015, as well as all agreements related to the current Greek program,” said a statement from Eurozone finance ministers.

That means Greece will not get the final €7.2 billion tranche of bailout funds, so it won’t have the money to make a €1.6 billion payment to the IMF on Tuesday.

Even more seriously, without the program, the ECB may cut off the liquidity support to Greek banks, which totals almost €90 billion, setting the stage for imminent collapse.

Members of the ECB will have an emergency conference call on Sunday.

The ECB may cut off the liquidity support to Greek banks, setting the stage for imminent collapse.

The referendum idea was announced in a dramatic televised address by Tsipras at 1 a.m. Saturday, several hours after heated discussions and a deadlock during a summit of European leaders in Brussels. The vote, he said, was necessary “for future generations, for the sovereignty and dignity of our people.”

European officials said they had no choice but to begin preparing for Greece’s default and possible exit from the euro currency area.

Euro group President Jeroen Dijsselbloem called the referendum “a sad decision for Greece.” Athens’ decision, he added, “has closed the door to further talks when the door was still open in my mind.”

Looking sombre and tired, Dijsselbloem told the press afterwards: “Easy programs are not available, that’s the truth. And if the Greek government is not willing to take that to its people, then it has a credibility problem.”

Recent polls suggest that the vast majority of Greeks — about 80 per cent — want the country to remain in the euro. At the same time, Tsipras’s far-left Syriza party consistently places first in national polls.

The Euro group has spent the last five months trying to strike a deal with Greece. The sticking point has been the same throughout: a demand by the creditors for deep reforms, which Tsipras, elected on an anti-austerity platform, has tried to soften.

After the referendum was announcement, the concern across Europe turned to safeguarding the common currency from the economic and political fallout of a Geek departure.

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“We are in a much stronger position than during the crisis,” said the statement from the finance ministers. “Euro-area member states intend to make full use of all the instruments available to preserve the integrity and stability of the euro area.”

The reaction in Greece

Across Greece, long queues began to form at cash machines and gas stations Saturday as residents braced for the worst.

On the streets of Athens, many locals said they welcomed the referendum.

“I will vote ‘No’ with a capital ‘N’,” said Athanasios Katsageorgiou, who has run a small pet shop selling canaries, guinea pigs and pet food for more than a decade. “I don’t think that by voting ‘No’ I’m saying ‘no’ to the euro, but if the euro is holding a knife to my throat I wouldn’t have a problem with going back to the drachma.”

Greeks have withdrawn more than €35 billion in deposits since the beginning of the year, forcing the banks to seek emergency liquidity from the ECB.

By Saturday afternoon, more than €600 million had been withdrawn from Greek banks since Tsipras made his announcement, according to an EU official. The volume of withdrawals for a normal weekend is €30 million.

“What are we looking at now? That in the next days Greece is going to be facing some very acute difficulties,” said German Finance Minister Wolfgang Schäuble on Saturday.

“It’s a big disappointment for all of us, today is not a good day,” he continued. “But we’re ready to do everything necessary. Often after times of crisis, you come out ahead.”

In calling a popular vote, Tsipras is putting the onus for the decision directly on the Greek population. His leftist government rose to power by opposing the kind of cuts demanded by creditors. The move toward a referendum suggests that Tsipras doesn’t believe he has the political legitimacy to endorse a deal without a direct mandate from voters.

It’s unclear how a referendum would be phrased since Greece’s constitution does not allow popular votes on fiscal matters.

“We never considered giving in — not even for a moment. Of betraying your trust,” Tsipras said in his speech.

It’s unclear how a referendum would be phrased since Greece’s constitution does not allow popular votes on fiscal matters – and since there is no creditors’ proposal to be accepted or declined any more.

Blaming the EU

Speaking to the press in Brussels after the collapse of the special Saturday summit, Finance Minister Yanis Varoufakis said the referendum “is not about the euro.”

He said that Greece would stay in the Eurozone no matter what happens after Tuesday, noting that EU treaties have no provision for a country to exit the the single currency zone.

Officials from the Syriza governing party reject the link between a default on loan payments and a Grexit from the euro. However, the consensus view in the European Commission is that in case of default, Athens would be hard pressed to stay in the EU, much less the euro.

The far-left Syriza government is vulnerable to two seemingly contradictory charges: That it allowed European creditors to impose any new economic austerity measures on Greece, or that it allowed Greece to tumble out of the euro.

Helen Popper and Yiannis Baboulias in Athens and Florian Eder in Brussels contributed reporting to this article.

Zeke Turner and
Matthew Karnitschnig

Greece heads toward euro exit – POLITICO