ATHENS — In an unexpected move, Prime Minister Alexis Tsipras went on national television early Saturday to call for a referendum on July 5, so that Greek citizens can decide whether to accept or reject the terms of a bailout deal proposed by the country’s creditors.
This will be very interesting to watch. I kinda admire this trick. Let the Greek voters decide, directly, whether they want the country to go bankrupt or to cut pensions/raise taxes/etc. He definitely threw the whole shebang for a loop.
Here’s what would make it even more fun: for Merkel to call a referendum in Germany on whether to bail out Greece. And another twist from
But following Mr Tsipras’s dramatic move, European officials said there was now no deal on the table for Greek people to vote on, and discussions over a “Plan B” involving capital controls was being considered.
So it seems even if Greeks vote “yes” the deal is off the table.
It’s kind of instructive that Great Britain takes around 4 years to feebly organise a referendum on exiting the EU ( I dunno why they don’t just kick us out for being whiny bitches ) while the derided Greeks can manage one in two weeks.
Tsipras has a razor thin majority in parliament. I have the impression that some of the left wing of his party would even vote against his plan–and the vote against the troika plan would of course be more negative.
The doorstepping is over and the answer from finance ministers of Germany, Slovakia and Finland was clear. There will be no bail-out extension after June 30. This means Greece will be forced to default to the IMF on Tuesday and is poised to implement capital controls by Monday morning to stave off a banking collapse.
And Tsipras made it clear in his address that he opposes the plan. I suspect if there is a referendum, and it doesn’t look like there will be one, he would vote against the plan. The rest of Europe must realize that the chances of their plan being adopted by the Greek people is nil. So Europe took the plan off the table. So, Greece defaults.
The next (perhaps last) question is whether a default necessarily means Greece leaves the Euro. I don’t see why. The Greek banks are going to fail currency controls or no, and the Greek government won’t be able to sell much in the way of bonds, but if they want to continue to use the Euro-why not? The ECB shouldn’t be extending any more Euro credit to the Greek banks, which will shut them down temporarily, but like so many individuals today with bad credit, Greek should be able to function on a cash-only basis. It will be up to the Greek Government to pay the pensions etc out of current receipts-or not. I am glad I am not dependent on the Greek Government for support, but I don’t see an insurmountable problem. Let Greece stay in the Euro on a cash-only basis. The creditors can employ lawyers to argue the debts in court for the next 10 years, meanwhile life goes on minus the drama and minus the credit.
The “Referendum” was nothing but a very, very cynical maneuver to either buy time or mitigate the damage to his party by doing the “we’re all in this together” bit.
A 2-bit sideshow which convinced nobody of anything.
Now, the creditors are openly hinting that the Greeks will need a new govenment, because this one cannot be trusted to follow up on required reforms.
Nice move, asshole. Take the entire country down with you.
There’s a difference between “being in the Euro” and “using the Euro as your unit of money”.
For example, Panama uses the US dollar. They call it the Balboa, but it’s US currency through and through. It’s not pegged to the dollar; it *is *the dollar.
What the Panamanians don’t have is any voice whatsoever in any monetary policy. The US does whatever it wants to the dollar and Panama is drug along like a 4-year old dragging a raggedy stuffed animal by its one surviving ear.
Greece *might *be able to continue using the Euro *a la *Panama’s dollars. What they *won’t *be able to do, IMO, is maintain a seat in the Euro governance process. Which includes little things like being able to transact directly with the ECB.
So once they in effect need their own central bank to perform those functions, but using somebody else’s currency, they’ll discover the Euro doesn’t work for them. They desperately need a devaluation, but can’t engineer one.
So real quickly we’ll see the new Drachma, or whatever they’ll call it.
Don’t think it was as cynical as people think. Hows his majority and will he be able to get back benchers to support any plan? His referendum would make it politically possible to accept a plan.
Unlike 5 years ago, I do have symphaty for the Greeks here. Austerity has killed of any hope of making getting Greece out of this mess. Frau Merkel has a lot to answer for. If I was Greek PM, I would be making plans to go to Russia/China next week.
good points and I understand the difference. Panama decided to use the dollar for internal trade knowing full well that removed local control. They decided it was a good idea. It was not in the US interest to give Panama a seat on the Federal Reserve. Not offered, not expected, not done.
OTOH, it might be in Europe’s interest to let Greece remain in the Euro with the controls and influence-and access to the ECB-that implies. Europe would have to recognize that Greece isn’t going to live up to the monetary targets specified in the Euro treaty. But that hasn’t been happening anyway and Europe has accepted it so far. It would be up to the ECB whether and how much credit to extend to the Greek banking system. It would be up to Greece to decide whether to stay. Many in Greece might decide not to. My point is that it is not required that Europe kick Greece out of the Euro. Europe gains the advantage of saying no one leaves. Greece gains the advantage of a small influence on the Euro and of saying they are part of the Euro. Whether that will be enough for Greece is up to them.
I would agree with many that say it isn’t going to be worth it for Greece to stay in the Euro, but I am saying it is possible that Europe could leave that decision up to the Greeks. Perhaps it is time for Europe to let Greece make it’s own mistakes instead of continuing to make mistakes for them. Which from my limited reading of events in Europe may well be exactly what is playing out.
I guess the Greek equivalent of American preppers who bought gold are laughing [del]all the way to the bank[/del] at all the saps who trusted the government.
Seems to me like capital controls are a poor strategy long-term, because they’re only going to discourage the public from recapitalizing the banks once the crisis abates and make future bank runs even more precipitous. Perhaps it would be justified if Greece’s crisis was a one-time situation unlikely to reoccur in the future, but structural problems in their labor market and economy (such as the lack of a land registry) mean that future crises are probable.
Can someone fight my ignorance and explain to me what Greece’s problem is come July 1?
Greece is, by all accounts, running a decent primary surplus - IOW, if you take debt payments out of the picture, they’re taking in more than they’re paying out.
So if the ECB says they’re not giving Greece any more money to pay back its creditors with, and Greece thereby is forced to tell its creditors to fuck themselves, their financial condition should improve over time on account of the primary surplus.
I’m obviously missing something big, since everyone agrees that, at least in the short term, the sky will fall on Greece when the ECB pulls the plug. So what is it that I’m missing? International finance isn’t exactly my area, so lend me a hand.
The troika’s goal (the ECB is but one prong) is not to force Greece to default. The troika want’s to see Greece make structural improvement’s to their economy such as raising the retirement age and the effective retirement age, creating a land registry, privatizing or shuttering government industries that are not only inefficient but actually cost money, reducing the civil service, removing red tape and bureaucracy, and improving tax collection. While these changes are deemed austerity, and some are, others are really common sense issues (like making it culturally unacceptable to defraud tax authorities) that everyone should support. Greece doesn’t want to do these things because they may result in short term harm despite long term benefits, and because the beneficiaries are diffuse while those harmed suffer substantially.
Consequently, Syriza basically told the troika that they were not going to make any changes to their economy. Syriza essentially tried to set up a dichotomy–give Greece money without structural changes, or give Greece no money and watch them default. It is clearly preferable, given these set of choices, for Europe to give Greece money. The troika, however, tried to create a different set of choices–Greece makes structural changes and gets money, or Greece does nothing and defaults. If Syriza has these choices, they would probably choice to reform their economy. What we are seeing is the battle of wills between the two sides.
If an analogy makes it easier to understand, the situation compares to brinkmanship during the cold war or a game of chicken.
This may not be my area of expertise, but a government whose budget is in primary surplus is one that is already doing right things to shape up.
ISTM that the ECB, IMF, etc. is overstepping their bounds by going past demanding what the primary surplus targets should be, and in addition dictating how Greece must go about meeting them.
Unless they can demonstrate that Greece’s proposed path to meeting those targets simply won’t work - and give Greece a good reason why they should trust the austerians’ arguments on what will work THIS time - then the ECB, IMF, etc. should accept the targets, or find them insufficient, and not get into the means of achieving them.
