Greek plan for referendum on debt draws scorn

Euro finance chiefs say door is closing to further talks on resolving stand-off

Brussels - Euro zone finance chiefs poured scorn on the Greek government's decision to call a referendum on the terms of the country's bailout and rejected any extension of a deadline for Athens to come to an agreement.

Finance chiefs from 18 euro nations said they would grill their Greek counterpart Yanis Varoufakis on what his government proposed, after the sudden announcement of a referendum upended their work on the way forward.

They met in Brussels yesterday, hours after Greek Prime Minister Alexis Tsipras called a July 5 ballot on whether Greece should accept the demands of the country's creditors.

"It's a very sad decision for Greece because it's closed the door to further talks, a door that was still open in my mind," Dutch Finance Minister Jeroen Dijsselbloem, who chairs the meetings, told reporters as he arrived.

"We will hear from the Greek minister today and then decide on the future consequences."

Ministers who had thought the fifth Eurogroup meeting in little more than a week would hammer out the final pieces of a deal on aid must now take stock of one of the most dramatic moves yet in a debt crisis that began more than five years ago.

The referendum throws into doubt future financing for Greece after its current bailout ends on Tuesday.

German Finance Minister Wolfgang Schaeuble said the Greek government appeared to have "unilaterally" pulled out of any further negotiation with its plan to hold a ballot on a common proposal put forward by creditors.

"We no longer have a basis for negotiation," he told reporters as he arrived for the meeting.

"Plan B is fast unravelling and becoming Plan A," said Finnish Finance Minister Alexander Stubb. There's a "clear consensus" among ministers that a bailout extension is "out of the question".

Ministers are facing "potentially a very sad day", he said.

The outcome of the talks in Brussels will help determine a series of events over the coming hours before markets - and Greek banks - open tomorrow morning.

With evidence that some automated teller machines in suburbs of Athens had run out of cash yesterday, Greek lawmakers debated the government's referendum plan, including the proposed question to be put to the people.

The turn of events was sparked after midnight in Athens, when Mr Tsipras returned from week- long negotiations in Brussels and announced the referendum. In a nationally televised address, he excoriated a take-it-or-leave-it offer as a violation of European Union rules and "common decency".

Some members of his Syriza party advocate defaulting rather than backing down from their anti-austerity policies and Greek ministers, including the defence chief, urged the country of 11 million people to vote "no".

"Our partners, unfortunately, resorted to a proposal-ultimatum to the Greek people," Mr Tsipras said.

"I call on the Greek people to rule on the blackmailing ultimatum asking us to accept a strict and humiliating austerity without end and without prospect."

Belgian Finance Minister Johan Van Overtveldt expressed bemusement at the referendum.

"I find it quite a bizarre move to ask the people what they think of something and say at the same time that the government is opposed to it."

A "no" vote could ultimately draw the curtain on Greece's membership in the euro zone.

Faced by a rejection of its demands and those of other creditors, the European Central Bank (ECB) could feel obliged to cut off the emergency funds that Greece's banks rely on for survival.

On the other hand, a "yes" vote would spell defeat for Mr Tsipras and may force him into early elections.

"It looks as if we will have capital controls as of Monday," Dr Guntram Wolff, director of the Brussels-based Bruegel group, said in an e-mail. "The ECB will unlikely continue to provide ELA (Emergency Liquidity Assistance), and capital controls therefore become imperative."

Bloomberg

A version of this article appeared in the print edition of The Sunday Times on June 28, 2015, with the headline 'Greek plan for referendum on debt draws scorn'. Print Edition | Subscribe