A Greek exit from the euro is looking increasingly likely. It would be the first reversal for European integration since 1945. Endless twists and turns further frayed investors’ nerves. The Greek government called a referendum for 5 July on the terms of an extension to the EU/IMF rescue package that expired at the end of June. Banks were shut to prevent a collapse of the financial system after mass withdrawals; locals are limited to taking €60 a day out of cash machines.
The terms of the rescue package have officially expired, it is uncertain whether they can be offered again, and eurozone leaders have said that they consider a “No” vote to mean a Grexit. Rattled Greek premier, Alexis Tsipras, made a request for new loans, which was rebuffed, then went on Greek television to urge a “no” vote, denying it would mean a “rupture” with Europe.
Germany said there would be no talks pre-referendum. On Tuesday night, Greece missed a €1.6bn payment to the IMF, becoming the first developed country ever to default on an IMF loan. Market jitters have sent the FTSE 100 into the red for the year. The pound hit an eight-year high against the euro.
What the commentators said
This has gone from “high drama to low farce”, said James Mackintosh in the Financial Times. Greece made “a cheeky request for new loans even after calling a referendum on the terms of a different lending facility it has already rejected, which will have expired by the time of the poll”. If the vote is “yes”, Tsipras has hinted he would resign. The Europeans may be hoping that he will be replaced by a government of national unity, said Alastair Winter of Daniel Stewart.
But for now the polls point to a clear majority saying “No” to more austerity. Still, said economist.com, the gap is closing as “banks remain closed and fear of a doomsday scenario builds”. Whether enough Greeks join the “Yes” ranks before Sunday to keep it in the eurozone “is the million-drachma question”.