Greek PM Calls for Referendum on Bailout While EU Denies Extension

How far has Greek Prime Minister Alex Tsipras wandered from reality? Tsipras has called for a referendum on the “take it or leave it” offer from Greece’s creditors, targeting July 5th for election day.

But Greece will default on a $1.6 billion payment to the IMF on July 1. And the EU, fed up with Tsipras’s posturing and arrogance, have refused to grant Greece a one month extension on the IMF terms.

So if the Greek parliament approves a referendum, by the time it’s held Greece will be in default.

What Tsipras is looking for is ammunition to use in his argument against the terms of the bailout. He claims that since the Greek voters elected him and his far left Syriza party earlier this year on a platform to end austerity and go back to the good old days of spending lavishly on the welfare state, that the rest of Europe should bow to the voters of Greece and give him more easy money.

Not unexpectedly, the rest of Europe looked with astonishment at this argument and have been telling the PM for months that he has no choice but to make the required reforms in order to receive the rest of the $260 billion bailout and perhaps negotiate another.

But Tsipras refuses to face reality and now, the endgame is playing out.

Reuters:

Athens asked for an extension of Greece’s bailout programme beyond Tuesday, the day it must pay 1.6 billion euros to the International Monetary Fund or go bust.

But the other 18 members of the euro zone unanimously rejected the request, freezing Greece out of further discussions with the European Central Bank and IMF on how to deal with the fallout from a historic breach in the EU’s 16-year-old currency.

The swift rejection was a startling demonstration of the degree to which Tsipras had alienated the rest of the currency bloc with a final-hour announcement that upended five months of intense talks.

The Eurogroup of finance members shut Greece’s Yanis Varoufakis from a meeting in Brussels and issued a statement without him, accusing Athens of breaking off negotiations unilaterally.

“The current financial assistance arrangement with Greece will expire on June 30, 2015, as well as all agreements related to the current Greek programme,” it said, making clear its refusal of a grace period to hold the vote.

Varoufakis said the refusal to provide an extension “will certainly damage the credibility of the Eurogroup as a democratic union of partner member states”.

The euro zone finance ministers met in Brussels for what had been intended as a final negotiation for a deal.

But after they were blindsided by Tsipras’s surprise middle-of-the-night announcement that he rejected their offer and would put it to voters only after Tuesday’s deadline, one after another said all that remained to discuss was “Plan B” – how to limit the damage of default.

“We have no basis for further negotiations,” German Finance Minister Wolfgang Schaeuble said ahead of the meeting. “Clearly we can never rule out surprises with Greece, so there can always be hope. But none of my colleagues with whom I’ve already spoken see any possibilities for what we can now do.”

Finland’s Alexander Stubb called it “potentially a very sad day, specifically for the Greek people. I think with the announcement of this referendum we’re basically closing the door for any further negotiations.”

With most Greek banks closed for the weekend, there was no sign of panic on the streets of Athens. Government officials said there was no plan to impose capital controls that would limit withdrawals.

But police tightened security around bank teller machines as lines formed at some in the darkness almost as soon as Tsipras’s early hours televised speech was finished.

The Bank of Greece said it was making “huge efforts” to ensure the machines remained stocked.

After years of going right up to the edge of default only to come up with a bandaid to kick the can down the road a few more months, Greece and the EU have come to the end of the road. Don’t expect a surprise acceptance of the terms by Tsipras at the last minute. His far left deputies in parliament are adamantly opposed to the reforms the EU is proposing, making it impossible for his party to remain in power if he does as the EU wants.