On Friday night the eurogroup’s Finance Ministers were shocked by the Greek government’s “irresponsible” and surprise decision to call a referendum on the proposed bailout proposal on 5 July, Finance Minister Edward Scicluna said in comments to The Malta Independent on Sunday last night in the wake of a long week of negotiations on the Greek fiscal crisis.
Prof Scicluna noted that the referendum as proposed by the Greek government would take place a full five days after Greece’s repayment deadline. Prof Scicluna added that if such a referendum were to be held, it should have been called a good month or even two months ago, and not at the 11th hour as was the case.
Prof Scicluna said that Prime Ministers gathered for this week’s summit “had not even heard a whisper about a referendum, and as such, all trust has been lost with this last trump card played by the Greek government.”
Financial instruments in place, Prof Scicluna added, meant that neither Malta nor its banks would face any contagion factor or debt risk should Greece default on its repayment obligations. Moreover, he assured, the European Central Bank has a number of instruments at its disposal with which it would be able to fend off any threats to the euro currency.
Prof Scicluna added that the eurogroup was united in its stance with the Greek government and that all were determined to safeguard the euro, avoid any possible contagion factor, and to assist the Greek people.
Meanwhile, the eurozone’s top official says the door remains open for more talks with Greece, even though the country’s government insisted that the international creditors had issued an ultimatum that forced it away from the negotiating table.
Jeroen Dijsselbloem, the President of the eurogroup meetings of Finance Ministers, said, “it was not the institutions that walked away from the last talks last night. It was not us that said the talks have come to an end in a negative way, it was the Greek government.”
He spoke after 18 of the 19 Finance Ministers from the eurozone met, excluding Greece.
Dijsselbloem said there are options left in the coming days, before Greece’s bailout programme expires after 30 June. Greece holds a referendum on the bailout proposal on 5 July.
“The process has not ended. It will never end, probably, and we will continue to work with Greece,” Dijsselbloem said.
Greece's future in the balance as creditors reject aid extension
Greece’s place in the euro currency bloc looked increasingly shaky yesterday after eurozone nations rejected a month-long extension to its bailout program me and the Prime Minister called for a risky popular vote on the country’s financial future.
Worried Greeks queued outside banks for cash amid the uncertainty, while eurozone Finance Ministers deciding to hold a meeting without Greece to assess how to keep the euro currency union stable in the face of heightened risks that Greece could drop out.
Prof Scicluna noted how some €500 million had been withdrawn from Greek banks yesterday.
Greek Prime Minister Alexis Tsipras shocked Greece’s creditors late on Friday when he called for a referendum in a week on whether to accept the reforms that the rescue lenders want in return for more financial aid. The country’s bailout programme ends on Tuesday and without an extension or more loans from creditors, Greece is likely to be in arrears on a debt payment due the same day. Its banks face the risk of collapse.
The Greek government’s call for the people to vote against a proposed bailout deal from international creditors on 5 July angered many of its eurozone partners.
“We must conclude that, however regretful, the programme will expire on Tuesday night. That is the latest date that we could have reached an agreement,” said Jeroen Dijsselbloem.
“The Greek authorities have asked for a month extension. But in that month there can be no disbursements,” he said. “How does the Greek government think that it will survive and deal with its problems in that period? I do not know,” Dijsselbloem said.
France’s Finance Minister, Michel Sapin, stressed that a deal was still possible and that he was ready to act as a go-between among Greece and the creditors after relations neared a breaking point.
Now much will depend on whether the European Central Bank will accept to continue to prop up Greek banks even after the country’s bailout programme expires. It would be under huge pressure to stop using eurozone taxpayer money to keep alive the banks if there is no prospect for a deal.
In that case, the banks would likely collapse and the Greek government would have to support them itself. Penniless, the government would have to revert to printing a new currency, effectively drawing the country out of the euro union.
The governing council of the ECB will meet “in due course” to assess the situation.
Greek Finance Minister Yanis Varoufakis insisted that Athens and lenders still had time to improve the deal - and avoid a negative outcome to the referendum. “There is no reason why we can’t have a deal by Tuesday. If the deal is acceptable we will recommend a positive vote,” he said.
“It’s a sad day for Europe but we will overcome it,” Varourfakis said upon leaving while his counterparts continued talks.
The sides are haggling over the reforms the country needs to make in exchange for more financial aid but have managed to only increase uncertainty over the country’s future.
Greece has a debt due on Tuesday and its bailout programme expires the same day, after which it is unclear whether its banks would be able to avoid collapse, an event that could be the precursor to Greece leaving the euro.
The Greek Parliament was to debate and vote at midnight last night on the government’s request for a referendum. The Greek government said it would recommend Greeks vote ‘no’ in the referendum, but Varoufakis noted “the high possibility that the Greek people will vote against the advice of the Greek government.”
What would happen in that case — whether Greece would have to leave the euro or try to renegotiate more time with creditors — is unclear.
An exit from the euro would put Greece through a new era of economic pain. With the new currency less valuable than the euro, the government would have to write off a chunk of its foreign loans — mainly owed to eurozone countries — and many companies and households would go bankrupt. Experts predict a long and deep recession in a country that has already been through five years economic depression.