Opposition in the wings as Tsipras prepares for referendum

Greece looks closer to exiting the euro than ever before – but it’s not over yet

Greek Prime Minister Alexis Tsipras during a parliamentary session in Athens, Greece. Photograph: Milos Bicanski/Getty Images

Greek Prime Minister Alexis Tsipras during a parliamentary session in Athens, Greece. Photograph: Milos Bicanski/Getty Images

 

The events that have unfolded over the past 48 hours appear to be pushing Greece closer towards the exit door.

More than five years after it began its first bailout programme, the embattled country looks closer to an exit than it has ever been.

In many ways, it was obvious that prime minister Alexis Tsipras was never going to agree to sign on the dotted line on Saturday. Politically, it was in his interest to hold his fire until the last second in order to extract the best possible deal for his country. As a sort of self-styled Che Guevara figure, he was not going to surrender his ideals without a fight.

But his announcement in Athens in the early hours of Saturday morning of a referendum to be held next Sunday – five days after the Greek bailout was expected to expire – took even some in his own party by surprise. Allegedly, Greece’s negotiators in Brussels only heard of the referendum through Twitter.

As euro zone finance ministers arrived in Brussels at lunchtime on Saturday for their fifth emergency eurogroup meeting in just over a week, the signs were not promising. Three hours later, eurogroup head Jeroen Dijsselbloem emerged from the meeting to confirm what most observers had expected: the eurogroup was not going to extend the Greek bailout, as requested, by another five months.

Greek finance minister Yanis Varoufakis left the meeting and briefed the press, and the remaining 18 members of the euro zone reconvened to discuss measures to stabilise the euro zone.

The symbolism of an 18-member eurogroup was immediately apparent, suggesting a new euro formation was already taking shape.

The message from Dijsselbloem was clear: the remaining members of the eurogroup were now focusing on ensuring the “resilience” of the euro and preventing contagion should a Greek default occur.

‘Wise decision

A defiant Tsipras welcomed the outcome of the vote. “We don’t need to ask permission from Mr Schaüble [the German finance minister] or Mr Dijsselbloem to let the voice of the Greek people be heard,” he tweeted. “We will be holding the referendum next Sunday, honouring the sovereignty of our people and our future.”

The focus on Sunday turned to the ECB governing council’s decision on whether to increase emergency liquidity assistance to the Greek banking system. As expected, the ECB, which has been incrementally increasing its supply of assistance to the Greek financial sector, capped the amount it was providing at Friday’s level of just over €89 billion.

The European Commission also published on Sunday the final version of the proposals that were still on the table on Friday, with EU economics commissioner Pierre Moscovici stressing that the door was still open to Greece to accept the proposals. The text may also form the basis of the referendum question, should the ballot takes place next Sunday.

Precedent suggests it could be superseded by events – four years ago, then prime minister George Papandreou cancelled a planned referendum on austerity measures after reaching agreement with creditors.

Tuesday presents another set of deadlines. While the looming €1.6 billion repayment to the IMF is weighing on minds, arguably the expiration of the bailout is more serious. Should Greece find itself outside a loan programme, this would give the green light to the ECB to increase the haircut it applies to the collateral the Greek central bank uses to draw down funds, or begin to withdraw emergency liquidity.

The domestic dynamics of the Greek crisis are likely to come into play this week.

Should the referendum take place and the Greek people signal their support for the euro and the austerity pledges that involves, Tsipras will have to resign, given that Syriza has already said it was campaigning on a No platform.

Opposition stirrings

Antonis Samaras

As Wolfgang Schaüble said, a default does not necessarily mean Greece would exit the euro, though his Austrian counterpart admitted on Sunday that a Grexit was more or less inevitable. As Minister for Finance Michael Noonan said on Sunday in Brussels, the euro area has entered uncharted territory.

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