On the day its €240 billion bailout program expired, Greece made a last-minute effort to get emergency funding from other European Union countries but was turned away by creditors who said it now had to wait until voters confirm they want to stay in the eurozone.
Greece’s far-left government called a referendum on the creditors’ latest bailout proposal this weekend in a move that infuriated European leaders who had been negotiating with it for months. They wanted the Balkan country to honor the conditions of a financial aid package that saved it from bankruptcy but is also blamed for depressing growth and leaving one in four Greeks without a job.
Alexis Tsipras, the Greek prime minister, likened the creditors’ position to “blackmail” and said their demands for economic and pension reforms in return for the final tranche of the bailout placed “unbearable new burdens on the Greek people.” He urged them to turn down the creditors’ proposal.
But that proposal is no longer on the table as the bailout is legally over. Another round of financial assistance would require approval from eurozone parliaments. It unlikely lawmakers in countries like Finland, Germany and the Netherlands would agree to lend Greece more money after it reneged on the terms of its last bailout.
Without the money to pay off a €1.5 billion loan from the International Monetary Fund on Tuesday, Greece is entering default and edging closer to an exit from the eurozone. It has had to impose capital controls to stop a bank run while the European Central Bank capped its emergency funding of Greek banks at €89 billion, waiting for a political resolution.
Tsipras threatened on Monday to resign if the referendum produces a vote in favor of a plan that is now outdated, saying, “If the Greek people want to proceed with austerity plans in perpetuity […] we will respect it. But we will not be the ones to carry it out.”
Tsipras was elected in January on vows to end austerity but could not persuade the European Union and the International Monetary Fund to change the conditions of Greece’s bailout. The Greeks unilaterally pulled out of agreements they had made with their lenders, including privatization efforts and labor market reforms that were supposed to make the country more competitive and prevent another debt crisis in the future.
European leaders said on Tuesday the referendum would effectively be a vote for or against Greece’s euro membership.
Germany’s economy minister, Sigmar Gabriel, told reporters in Berlin, “It must be crystal clear what is being decided. It is, at the core, ‘yes’ or ‘no’ to remaining in the eurozone.”
His boss, Chancellor Angela Merkel, ruled out an extension of the current bailout, saying no decisions could be made until after the referendum — which is scheduled for Sunday.
François Hollande, the president of the bloc’s second largest economy, similarly said, “It is about knowing whether the Greeks want to stay in the eurozone.”
Even Italy’s Matteo Renzi, who has often been the most sympathetic of Tsipras’ requests for leniency from the creditors, said, “This is a runoff: euro or drachma.” He told the Il Solo 24 Ore newspaper, “The Greeks [have to say] whether they want to remain in the single currency or not.”
Polls have consistently shown that most Greeks want to keep the euro. But Tsipras’ far-left Syriza party also remains popular while a majority backed its uncompromising negotiating tactics that brought the country to this point.