US President Barack Obama yesterday urged German leader Angela Merkel to find a solution to Greece’s economic crisis as bailout talks broke down and the country said it would put its latest offer from creditors to a referendum next weekend.
The referendum question will be “Do you accept the institutions’ proposal as it was presented to us on 25 June in the Eurogroup?”.
The deal demands Greece introduces pension reform and wage cuts.
US treasury secretary Jack Lew also weighed in, urging the International Monetary Fund (IMF) and others to take an easier stance on Greece.
After Obama’s conversation with Merkel, the Whitehouse said in a statement: “The two leaders agreed that it was critically important to make every effort to return to a path that will allow Greece to resume reforms and growth within the Eurozone.”
Meanwhile, Lew spoke with IMF chief Christine Lagarde and German and French officials to urge them to find a solution “including a discussion of potential debt for Greece, in the run up to the 5 July referendum”.
Greek finance minister Yanis Varoufakis hit out at his Eurozone counterparts, isolating him and blaming Greece for the impasse.
It came after a statement yesterday hinted that the Eurogroup of finance ministers was preparing for a default and possible Grexit.
“We commit to take all necessary measures to further improve the resilience of our economies. We stand ready to take decisive steps to strengthen the Economic and Monetary Union,” a Eurogroup statement, which explicitly excluded Greece, said. It provoked an angry response from Varoufakis.
“The Eurogroup President rejected our request for an extension, with the support of the rest of the members, and announced that the Eurogroup would be issuing a statement placing the burden of this impasse on Greece and suggesting that the ministers (except the Greek minister) reconvene later to discuss ways and means of protecting themselves from the fallout.”
WHAT HAPPENS IF GREECE VOTES...
This leaves two options. The first is for the government to admit defeat and resign. This would prompt new national elections, which would happen within a month. This would create a long period of uncertainty while the new government negotiates with lenders, and there is no certainty that elections would lead to a viable government or one not led by Syriza. New elections would also take place after hefty debt repayments. Or the government could struggle on and implement the reform programme. It would likely cause a split in Syriza, and the Prime Minister would have to seek support from other parties, likely including New Democracy.
Prime Minister Tsipras said on Saturday he would not consider a “no” vote as a call to leave the euro, but as a tool to negotiate a better deal. This seems unrealistic given that lenders have made it clear they are not willing to further improve terms. Without funds to cover its debt obligations and with banks operating under capital controls, the government would have no room for manoeuvre from Monday, making a “Grexit” seem inevitable. At this point it is possible that President Pavlopoulos could resign, triggering national elections, a change of government, and a last-minute chance to prevent a Grexit.