Greek Prime Minister Alexis Tsipras has announced a referendum in response to the ultimatum submitted by the country's creditors, the so-called 'institutions', formerly the troika of the European Commission, the European Central Bank and the International Monetary Fund.
On Saturday Mr Tsipras will formally ask for a few days extension to the program Greece is in so that the Greek people can vote next Sunday, July 5, without undue pressure. (If Greece is not formally in the program, the ECB is not allowed to support Greek banks).
After the euphoria earlier in the week when it seemed that Greece and its creditors were quite close to a deal it is stunning to arrive at this point. Paul Krugman had something to say about it earlier this week.
Talk to IMF people and they will go on about the impossibility of dealing with Syriza, their annoyance at the grandstanding, and so on. But we’re not in high school here. And right now it’s the creditors, much more than the Greeks, who keep moving the goalposts. So what is happening? Is the goal to break Syriza? Is it to force Greece into a presumably disastrous default, to encourage the others?
At this point it’s time to stop talking about “Graccident”; if Grexit happens it will be because the creditors, or at least the IMF, wanted it to happen.
The Prime Minister has promised to fully support whatever the Greek people decide though it seems quite clear that he and his government will be pushing for 'NO'.
I have updated with new information and my own thinking as they became available and may continue to do so for a while. It is getting very late here.
One thing that this will lead to is intense division within Greece. The fight has already begun on twitter with various anti-government twerps suggesting that referenda on purely financial matters are unconstitutional.
Others are posting what appear to be lines at ATMs very late on Friday night - early Saturday morning. In recent days German TV crews were staked out near banks in the hopes of filming a bank run. Naturally these days bank runs don't happen in person since everyone banks online.
What no one knows of course, is exactly what the question will be. Phrasing matters.
For further reading on how we got here and why the Greeks are not solely to blame, I heartily recommend Mr Krugman, above and the two links below. Please read before commenting that the lazy Greeks had it coming.
The really important thing is that without debt relief of one kind or another, Greece's debts will not be paid. So far none of the creditors have lost a single euro, in fact most have made a profit on the whole Greek drama. That will change and the IMF has more to lose than most, which makes its behavior this past week less than comprehensible.
Coppola comment:
The harsh treatment meted out to Greece over the last five years makes no economic sense whatsover. It has driven Greece into a deep depression that not only makes its government budget unsustainable but renders its debt unpayable: it has not only caused poverty and distress among Greece's population, but it has driven businesses into bankruptcy and done serious damage to the supply side of Greece's economy. And yet creditors want more.
Jeffrey Sachs:
Europe’s demands – ostensibly aimed at ensuring that Greece can service its foreign debt – are petulant, naive, and fundamentally self-destructive. In rejecting them, the Greeks are not playing games; they are trying to stay alive.
5:05 PM PT: From the New York Times:
“After five months of tough negotiations, our partners ended up with a proposal in the form of an ultimatum,” Mr. Tsipras said, noting that the creditors were calling for “new unbearable measures” including tax increases and cuts to pensions and salaries.
The nature of the proposal suggested that “the goal of some of Greece’s partners is the humiliation of an entire nation,” he said.
http://www.nytimes.com/...
8:02 PM PT: As it is now almost 6 in the morning here and the birds are beginning to make a racket, I'm off to bed. Thanks to everyone for a great and civil discussion. I will get back to you in a few hours.
This is an issue that could potentially affect the world economy and it certainly is an issue of social justice and rational economics. Bernie himself weighed in a while back and I leave it as an exercise for someone to find the letter he wrote on the matter.
Good night and good luck.