Referendum trap pushes Greece closer to Euro-exit

It has now become known that the negotiations did not actually break down over presumed insurmountable differences or an alleged ultimatum handed by Eurozone governments, which was portrayed as tantamount to blackmail by the Tsipras goverment, but the Greek team was suddenly ordered to leave the negotiating table and return home. At the same time the cabinet was meeting in Athens to approve the PM’s decision to call a referendum following a rejection of latest creditor bailout terms. In his dramatic midnight television proclamation, Greece’s young and agitating PM denounced the proposed bailout terms as they would “place unbearable new burdens on the Greek people and lead to unprecedented recession and poverty”, while calling voters to reject outright “this blackmail ultimatum”.
Over the weekend, huge queues formed at cash dispensing machines throughout the country as citizens withdrew their money predicting rightly that the referendum call would halt the bailout programme and prompt capital controls, which dully followed on Monday together with an indefinite bank holiday, in order to prevent the collapse of the banking system. Over the last few months, Greece’s banking system has relied heavily on ECB support through the Emergency Liquidity Assistance (ELA) programme in order to stay afloat as the depositors were constantly withdrawing money fearing “Grexit”. Since December last year, more than EUR 30 bln has left Greek banks with total deposits now standing well below 130 bln and banks running short of banknotes.
Following the tumultuous developments resulting from the Greek government’s decision to go ahead with a hastily organised referendum, eurozone finance ministers last Saturday denounced this move and at the same time rejected a plea from finance minister Yanis Varoufakis to extend bailout terms beyond Tuesday until the vote is held. In tune, and not willing to oblige the Athens government, angered by Tsipras’ double dealing, the ECB announced on Sunday that it was freezing all loans to Greek banks which meant no more ELA cash injections, thus forcing the Greek government to impose capital controls and a week long bank holiday while forcing depositors to limit daily withdrawals to 60 euros per person.
As Greece heads to Sunday’s critical vote over the country’s future in the eurozone, constitutional experts and public commentators are openly talking of a parliamentary instigated coup d’ etat since the terms on which the public is asked to vote and the very content of the actual vote form appear blurred and confusing to say the least. The general perception is that Greece is holding a referendum on a proposal that no longer exists for a punishing bailout programme since withdrawn by the creditors.
As Peter Spiegel wryly pointed out in the FT, “Athens sees things differently. It has framed the referendum as a vote on the final terms offered by Greece’s creditors for a bailout extension, not on the country’s membership of the eurozone. The highly technical question that Greeks will have to answer and which was revealed on Monday, does not even mention the single currency”.
Contrary to democratic parliamentary tradition, Mr. Tsipras and his ministers have taken sides urging a “No” vote to endorse the radical left government’s rejection of an alleged “blackmail” by the EU, ECB and IMF to apply further harsh austerity measures in return for a generous bailout. The third in line since Greece was first declared bankrupt in May 2010.
Drawing attention to the seriousness of the situation, European leaders warned Greeks that Sunday’s vote on the country’s international bailout was a referendum on its membership of the eurozone, pointing out that rejection would not bring an improved offer and would have disastrous economic consequences. This perilous state of affairs is further confounded by the Greek government’s decision to default on EUR 1.6 bln loan payment to the IMF on June 30. Defaulting on this payment will put Greece in the same category as Zimbabwe, Sudan and Cuba. Even more critical is a EUR 3.5 bln payment that Greece must make to the European Central Bank at the end of July. In an exhaustive press conference on Monday, Jean-Claude Juncker, president of the European Commission, openly admitted that he felt cheated by the Greek government’s devious negotiation tactics and argued that a “no” vote would lead to Greece leaving to Eurozone.
Although much of the blame for this lamentable situation lies no doubt with Athens and Mr. Tsipras’ intransigent and wildly populist policies, it appears that creditors are to a large extent also responsible for insisting on a one-sided agreement which in the first place refused to address Greece’s serious debt problem, despite written assurances given in a 2012 bailout agreement. Their inflexible attitude has fuelled the Greek PM’s argument, and his SYRIZA party’s long stated and clearly worded policies, advocating not only Greece’s exit from the Eurozone but also from the European Union and the pursuance of a completely independent path, cut off from Western links.
According to political commentators in Athens, SYRIZA’s secret plan for turning Greece into a neo communist state, complete with central planning and state owned industries, is now rapidly unfolding. They further argue that Alexis Tsipras and his radical left party never really intended to negotiate seriously with the EU, EC and IMF and all along were aiming for a major confrontation which is now underway.