Greek lawmakers on Sunday (28 June) authorised Prime Minister Alexis Tsipras’ proposed 5 July bailout referendum, setting Greece on course for a plebiscite that has enraged international creditors and increased Greece’s chances of exiting the eurozone.
The government easily passed the 151-vote threshold needed to authorise the referendum, with deputies from the far right Golden Dawn voting with the government and pro-European opposition parties New Democracy, Pasok and To Potami and the KKE Communist Party voting against.
Greeks are due to vote on whether to accept or reject the latest terms offered by creditors to Athens in order to unlock billions of euros in bailout funds.
Greek Finance Minister Yanis Varoufakis walked out of talks with the Eurogroup earlier Saturday (27 June), after creditors rejected his demand to extend the Greek bailout programme, which expires on Tuesday (30 June), to accommodate the referendum his government decided to hold on 5 July.
EU officials confirmed Tsipras took many by surprise after he decided to hold a referendum on bailout creditors’ demands, putting the deal that could determine Greece’s future in Europe to a popular vote in which the government would campaign against the agreement.
Before he left Brussels on Saturday, Varoufakis said that the possibility existed to negotiate further and “improve” the institutions’ proposal. A couple of hours later, Eurogroup President Jeroen Dijsselbloem left the door open to avoid a Greek default next week, but appeared to put to many hopes in the Greek parliament.
Confusion now surrounds the state of Greek finances, with the vote coming five days after a June 30 deadline for Greece to pay the IMF €1.6 billion that Athens says it cannot afford without a deal.
The Greek government’s immediate priority on Monday will to be to keep the country’s banks open.
ECB head Mario Draghi has been keeping the Greek banking system alive with near-daily cash infusions as it is frozen out of the capital markets.
A challenge for the eurozone
Amid political drama in Greece, where a clear majority wants to remain inside the bloc, the next few days present a major challenge to the integrity of a 16-year-old currency bloc, which many blame for massive unemployment in countries outside Germany and its neighbours in the richer north and west of Europe.
“We must do everything we can to fight any conceivable threat of contagion,” German Finance Minister Wolfgang Schäuble said after the meeting on Saturday at which the Eurogroup effectively called for capital controls to ring-fence Greek banks haemorrhaging cash.
While acknowledging that only Greece – or possibly banks themselves – can instigate such a shutdown, the ministers said the European Central Bank, whose management meets today (28 July), should use its powers to stabilise markets.
“You have to count on Greece getting into acute problems in the coming days because of this decision,” said Schäuble, some of whose conservative allies have made no secret of preferring to see Greece forced out of the eurozone. “That is difficult as we do not know how it will live up to its commitments.”
He and others, however, stressed their faith in stability mechanisms put in place after scepticism among investors pushed the eurozone to breaking point following a run of national bankruptcy scares in the wake of the global crash of 2008.
And, echoing his French Socialist counterpart, Michel Sapin, Schäuble insisted after the fifth such deadlocked ministerial meeting in just over a week: “Greece remains a member of the eurozone and Greece remains part of Europe.”
As Greeks lined up to take cash from ATMs, it remained to be seen how financial mechanisms would work. If Greece fails, as it has said it will, to repay €1.6 billion euros to the IMF on Tuesday, that default can have knock-on effects.
Some experts speculate that Greece could formally remain in the eurozone but issue its own IOUs to pay immediate bills.
The ECB must also decide whether to keep supplying liquidity to Greek banks, once the government whose debt makes up a large chunk of their assets is no longer meeting its obligations and once the bailout programme formally expires on Tuesday.
The central bank, under its president, Mario Draghi, has been reluctant to take such a highly politicised decision. At the same time, political leaders have been reluctant to override the decisions of finance ministers lest that appear to be a signal that the rules of the common currency are open to manipulation.
Donald Tusk, a former Polish prime minister who chairs meetings of the 28 EU leaders, made clear at two summits in the past week that heads of government must nonetheless take their responsibilities in a crisis that affects the Union as a whole.
Early on Sunday, he was in contact with leaders again: “Greece is and should remain euro area member,” Tusk tweeted.