A Greek default seemed inevitable when a meeting of European finance ministers broke up on Saturday without a deal to release the final €7.2 billion tranche of the country’s €240 billion bailout.
Greece desperately needs the money to pay off a €1.5 billion loan from the International Monetary Fund on Tuesday.
Any hope of a last-minute compromise was dashed when Prime Minister Alexis Tsipras unexpectedly announced a referendum on the latest offer from Greece’s creditors overnight.
The Netherlands’ Jeroen Dijsselbloem, who chairs the meetings of eurozone finance ministers, said the threat of a referendum — which could only be called after Greece’s bailout expires on Tuesday — “closed the door on further talks.”
His German counterparts, Wolfgang Schäuble, said, “The negotiations are clearly ended. We have no grounds for further discussions.”
Yanis Varoufakis, the Greek finance minister, left the eurozone meeting later on Saturday when the remaining eighteen ministers proceeded to discuss plans to cope with the fallout of a Greek default and likely exit from the currency union.
Finland’s Alexander Stubb said “Plan B” was quickly becoming “Plan A” — referring to the fallback plan to eject Greece from the euro.
In a televised speech early on Saturday, Tsipras said he would respect whatever choice the Greek people made. But he also advised them to reject the creditors’ latest offer which he said would place “unbearable new burdens on the Greek people.”
To this blackmail ultimatum […] and with no end to it in sight, nor with the prospect of allowing us to ever stand on our feet economically or socially, I call upon you to decide sovereignly and proudly, as the history of Greeks dictates.
Opposition parties blamed the prime minister for taking Greece to the edge of default and a eurozone exit.
“Tsipras brought the country to a total deadlock. Between an unacceptable agreement and a euro exit,” said his conservative predecessor, Antonis Samaras.
Kathimerini, one of Greece’s largest and most respected newspaper, accused Tsipras of shying away from his responsibilities and shifting “the burden of failure” to the Greek people.
One would have at least expected that the burden of the decision would have made this address more profound and cautious. […] But, alas, we heard nothing of that kind. What we got was gibberish, topped off with nationalist populism, typical of the speeches heard in university amphitheaters.
Since he was elected in January, the far-left Tsipras has sought reprieve from the spending cuts and liberal economic reforms Greece had committed to enact in return for financial support from other European Union countries and the International Monetary Fund.
The creditors were reluctant to give in from the start. In the end, the institutions rejected Greek proposals for a one-off 12 percent tax on corporate profits above €500,000 and a rise in employee pension contributions, fearing they would push the Balkan nation’s economy even deeper into recession.
Adding urgency to the crisis is the precarious state of Greece’s financial sector. Fearing default and an exit from the eurozone, Greek savers have withdrawn billions of euros from their bank accounts this week.
Usually, only between €200 and €300 million is taken out of Greek banks on a given day.
The European Central Bank provides emergency funding to Greece’s banks. But without an agreement to save the country from default, the bank will now be hard-pressed to justify continuing support.
There were no signs of panic in the streets of Athens, Greece’s capital, on Saturday. But lines formed at teller machines as people continued withdrawing cash and the national bank said it was making “huge efforts” to ensure enough money would remain available.