Shortly before 11pm on Tuesday, the heads of the European Commission and European Council entered the press room in the council building after yet another inconclusive meeting on Greece. The message was clear: Greece must strike a deal before Sunday or face ejection from the euro zone.
For the first time, the commission president confirmed authorities were working on a plan for a Greek exit. “We have a Grexit scenario prepared in detail,” said Jean-Claude Juncker, a position confirmed yesterday by a commission spokeswoman. While the preference was for Greece to stay in the euro, “it is only responsible to start working on a Grexit plan”, she said.
The possibility of Greece leaving the euro is closer than it has ever been, despite last Sunday's referendum result. A poll published by Reuters yesterday found 55 per cent of economists now expect a Grexit. In a research note to clients, Barclays echoed this view: "We retain our view that EMU exit is the most likely scenario."
While a summit of European Union leaders has been called for Sunday, it may be cancelled if a deal is struck before then. If the summit goes ahead, many expect it to discuss Grexit. The fact that all 28 EU leaders have been summoned suggests the plan may be to lay the legal groundwork for a Greek exit from the euro area.
Events on Tuesday in Brussels again nudged Greece closer to the exit door. The decisive referendum vote undoubtedly gave the Greek government a mandate to seek better terms from lenders. But as he rode on a wave of euphoria at home, prime minister Alexis Tsipras squandered this political momentum by arriving in Brussels again without a new proposal.
Once again, finance ministers and heads of state clocked up another wasted trip to Brussels as no progress was made on the Greek discussions. Equally unproductive was Tsipras's last-minute decision to fly to Strasbourg to address the European Parliament yesterday. Apart from the obvious opportunity for grandstanding, his speech was essentially pointless.
The parliament has virtually no say in what happens in the Greek crisis, a reality that has been abundantly clear over the last six years, as the commission and council have made the key decisions on the various euro-zone Spanish bailouts, leaving the parliament to look on from the sidelines.
The more important priority for Greece’s prime minister and his government is to bring forward a credible proposal by the weekend, as Tsipras vowed to do on Tuesday night.
Yesterday, Greece completed the first step in this process by submitting a formal request to the European Stability Mechanism for a three-year programme including bridging finance. More importantly, Athens is due to submit its reform proposals by midnight tonight outlining tax-reform and pension measures.
The failure of Greece to present proposals at Tuesday’s summit indicates a worrying lack of urgency on the part of the government. Greece has entered a state of economic emergency. Banks have remained closed for more than 10 days and withdrawals have been limited to €60 a day. As the norms of the economic structures of everyday life in a functioning democracy dissipate, Athenians ride the public transport system for free and invest in material goods such as cars and designer handbags to protect their cash.
No one doubts the Greek economy and the Greek public have undergone a devastating economic retrenchment programme, most of it due to the harsh terms of Greece’s bailout programmes, but in the immediate term the question should be if the current government, now in power for more than five months, is doing the right thing by its people.
As it stands, Tsipras and his government have made things infinitely worse for their electorate, with the economic repercussions of the last fortnight alone likely to be felt for years.
The only thing that could prove Greek voters made the right call in electing Syriza in January, and in endorsing the government’s position in Sunday’s referendum, would be if Greece secured a significant writedown of its debt. Despite the International Monetary Fund’s call for debt restructuring for Greece, resistance among euro-zone member states for a writedown persists.
German chancellor Angela Merkel said on Tuesday a debt haircut was "out of the question". Nonetheless it now appears likely some form of debt reprofiling will form part of a third bailout deal. The key question is whether this will be enough of a concession for Tsipras.