Brussels, 28/06/2015 (Agence Europe) - The eurozone was heading towards unknown territory on Sunday 28 June as Athens was unlikely to be able to honour a €1.6 billion repayment to the IMF on Tuesday 30 June, the day its financial bailout plan ends.
On television on Sunday evening, the Greek prime minister, Alexis Tsipras, announced the closure of Greek banks until Monday 6 July and the introduction of capital controls following the ECB's decision the same day not to increase the emergency lending (ELA) currently granted to Greek banks, because of the breakdown of talks on Saturday on an extension to the Greek rescue plan.
Despite the existence of a €100,000 savings guarantee, people in Greece have increased their withdrawals from the banks. This haemorrhage, which is weakening the entire Greek banking sector, has accelerated since Tsipras' announcement on Friday (confirmed on Sunday by the Greek Parliament by 178 votes to 120) of a referendum on Sunday 5 July on the package of reforms that Athens would have to introduce in return for ensuring that financial aid continues to flow to the country from its institutional lenders.
Athens also asked its European partners to extend the bailout for at least the time it will take for the referendum to take place. Tsipras said this was a basic democratic request and rejected the lenders' “blackmail”. On Sunday, the eurozone had not replied to Greece's request as trust in the country has been seriously undermined. Rumours of yet another eurozone summit were doing the rounds and the president of the European Council, Donald Tusk, reiterated that Greece's place remained in the eurozone.
Eurogroup refuses to extend the aid programme. On Saturday 27 June, the Eurogroup rejected Greece's request to extend the aid programme for a month. Blaming the breakdown of the talks on Athens, the Eurogroup then met without Greece in order to examine possible measures to preserve financial stability in the eurozone.
The “institutions” (European Commission, ECB and IMF) say that holding a referendum risks jeopardising work over the past five months to reach a compromise. Both sides had given ground, however, and several sources say a compromise looked possible on the rate of VAT to be levied on hotels and catering, but then shortly before midnight on Friday, the Greek negotiators learned from Twitter that a referendum had been called. Shortly afterwards, they were instructed by Athens to leave the negotiations.
The Greek authorities said they had warned France and Germany on Friday morning, at a three-way meeting of heads of state, about the holding of a referendum (see EUROPE 11343). But French finance minister Michel Sapin said the Greeks had had the “courtesy” to inform Francois Hollande just before the referendum was announced on Friday night. People say that if France and Germany had known about this plan on time, the two countries would have tried to talk Tsipras out of it.
Uncertainty remains about the wording of the referendum question for Sunday 5 July. The Greek government says that the country will be voting on the budget and economic efforts demanded of Greece and that if people vote in favour of the measures, then the government will apply them (even though it is calling on voters to reject them). Tsipras says a “no” vote will strengthen his country's position. The other side cannot understand how a referendum can be held on Sunday after the end of the rescue plan about a package of reforms that have not been finalised and that relate to the expired rescue plan (which ends on Tuesday).
Greek finance minister Yanis Varoufakis said the eurozone finance ministers' refusal to extend the Greek bailout in order to leave time to negotiate a better compromise that could get the Greek government to change its mind would “permanently ruin the Eurogroup's credibility”. The head of the Eurogroup, Jeroen Dijsselbloem, said it was “unfair” to ask the Greek electorate to reject the reforms on the table, and stressed the importance of ownership of reform programmes by a country's authorities. He added that they had “spoken so negatively of the programme”. He said Greece's lenders had shown the utmost flexibility in order to take account of a return of recession in Greece and the Syriza government's desire for a change of policy. On Sunday, the European Commission published the most recent version of the measures required of Athens by the “institutions”.
On Saturday, before chairing a second Eurogroup meeting (this time without Greece), Dijsselbloem said that as regrettable as it may be, the programme will expire on Tuesday evening. This second meeting was held to examine measures that might be needed to guarantee the eurozone's stability. It is not clear whether the Greek finance minister was thrown out by his colleagues or whether he left of his own accord - each side describes the events differently.
After this second Eurogroup meeting, Sapin explained that problems surrounding the current situation had been discussed, which he said had “nothing to do with a Grexit”, such as a run on the banks. A billion euros is reported to have been withdrawn from Greek banks on Saturday, compared with €30 million on a normal weekend.
Greece remains a member of the eurozone. In a statement, the Eurogroup said that it “stands ready to reconvene to take appropriate decisions where needed, in the interest of Greece as euro area member”. Sapin said nobody was thinking of Greece leaving the eurozone. Leaving the meeting, Economic and Financial Affairs Commissioner Pierre Moscovici said the eurozone had 19 members. All the “institutions”, including the IMF, seem prepared to return to the negotiating table. At the European level, however, people say it is unfair for Greeks to separate off the question of the bailout plan reforms from Greece's membership of the eurozone. In Die Presse on Sunday, Austrian finance minister Hans Joerg Schelling nevertheless said that leaving the eurozone was virtually inevitable.
At the Commission, there is criticism of inconsistency from the Greeks, time lost in endless negotiations, and the IMF's insistence on a reduction in the Greek debt nominal which frightens the member states (they demand greater austerity). There is also criticism of the lack of an interlocutor speaking for the member states. (Elodie Lamer and Mathieu Bion)
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