Greece heads toward euro exit

By Matthew Karnitscnig

After Tsipras's surprise call for a referendum, EU finance ministers meeting on Saturday say an extension of Greek bailout deal is unlikely.

Greece’s membership in the euro is hanging by a thread after Prime Minister Alexis Tsipras called for a popular referendum on billions in additional budget cuts, a stunt European finance ministers said effectively killed negotiations to extend Athens further aid.
In a final act of defiance to creditor demands, Tsipras announced the plan in a dramatic televised address at 1 a.m. Saturday, several hours after heated discussions and a deadlock during a summit of European leaders in Brussels.

The vote, he said, was necessary “for future generations, for the sovereignty and dignity of our people.”
European officials they had no choice but to begin preparing for a the Greece’s default and possible exit from the euro currency area.
Eurogroup President Jeroen Dijsselbloem called the referendum “a sad decision for Greece.” Athens’ decision, he added, “has closed the door to further talks when the door was still open in my mind.”

“A sad decision for Greece” — Eurogroup President Jeroen Dijsselbloem on the Greek referendum

Across Greece, long queues began to form at cash machines and gas stations as residents braced for the worst.
Athens asked creditors to push back a June 30 deadline to reach a deal to allow it to hold the referendum on July 5. But eurozone finance ministers at an emergency meeting in Brussels Saturday said the chances were bleak.
Without an extension, Greece’s bailout would expire and the country wouldn’t be able to draw on the remaining funds.
“I think there is a clear majority consensus inside the Eurogroup that an extension of the program is out of the question,” said Finnish Finance Minister Alexander Stubb. “I feel quite sad about the situation especially on behalf of the Greek people. I believe Plan B is quickly becoming Plan A.”
The move comes after a week of fruitless attempts between Greece and its creditors to break an impasse over the country’s reform agenda.
The creditor group, which includes eurozone countries, the International Monetary Fund and the European Central Bank, has offered Athens a series of concessions but is still demanding deep cuts to pensions and other reforms the leftist government says it can’t accept.
Barring an 11th hour resolution, Greece will likely default on a €1.6 billion loan repayment to the IMF due Tuesday. The country’s bailout expires on the same day, meaning it would lose the right to draw on untapped bailout money.
On the streets of Athens, many locals said they welcomed the referendum.
“I will vote ‘No’ with a capital ‘N’,” said Athanasios Katsageorgiou, who has run a small pet shop selling canaries, guinea pigs and pet food for more than a decade. “I don’t think that by voting ‘No’ I’m saying ‘no’ to the euro, but if the euro is holding a knife to my throat I wouldn’t have a problem with going back to the drachma.”
Some see the referendum as a final gambit on the part of the government to keep Greece in the euro. But so far, Europe isn’t backing do

• Needed: A creative solution to keep country in Union in case of Grexit.
  

Winning an extension would require parliamentary approval in some eurozone countries, including Germany. Even if Berlin were willing, it would be difficult to prepare the necessary legislation and vote by Tuesday.
Greek officials have been in contact with the ECB, trying to win another reprieve for the country’s banks until the referendum. Greeks have withdrawn more than €35 billion in deposits since the beginning of the year, forcing the banks to seek emergency liquidity from the ECB.
Once the bailout expires, the ECB’s lifeline may be cut. Without the assistance, which has reached nearly €90 billion, Greece’s financial system would likely collapse.
“For the last six months, the Greek government has been waging a battle under conditions of unprecedented economic asphyxiation, in order to implement your mandate,” Tsipras said in his televised address.
In calling a popular vote, Tsipras is putting the onus for the decision directly on the Greek population. His leftist government rose to power by opposing the kind of cuts demanded by creditors. The decision to call a referendum suggests that Tsipras doesn’t believe he has the political legitimacy to endorse a deal without a direct mandate from voters.

It’s unclear how a referendum would be phrased since Greece’s constitution does not allow popular votes on fiscal matters.

“We never considered giving in, not even for a moment, of betraying your trust,” he added.
The Greek parliament was debating the referendum measure on Saturday and it expected to pass it sometime in the evening.
It’s unclear how a referendum would be phrased since Greece’s constitution does not allow popular votes on fiscal matters.
Nevertheless, Finance Minister Yanis Varoufakis tweeted, “Democracy deserved a boost in euro-related matters. We just delivered it. Let the people decide. (Funny how radical this concept sounds!)”
Recent polls suggest that the vast majority of Greeks — about 80% — want the country to remain in the euro. At the same time, Tsiipras’s far-left Syriza party consistently places first in national polls.
The announcement of a surprise referendum came several hours after tense discussions in Brussels between Tsipras and German Chancellor Angela Merkel and French President François Hollande.
Tsipras could barely hide his anger as he left the two-day summit of the European Council, expressing his frustration, as he has often done in recent months, in comments laced with pathos.
“The founding principles of the European Union were democracy, solidarity, quality of life and mutual respect,” he said leaving the summit. “These principles are not based on blackmail and ultimatums.”