Tsipras gambles Greece
by Hugo Dixon
My instant reaction to Alexis Tsipras’ decision to call a referendum on whether to accept creditors’ terms on Jul 5.
1. Tsipras is effectively calling for Greece to quit the euro. Even if that’s not the question, that’s what it will amount to.
2. All sides have mishandled negotiation but Tsipras has mishandled it particularly badly.
3. Tsipras didn’t even complete the talks and wring out the last concessions. There was one more day to go.
4. Greece obviously won’t be able to pay the IMF on Tuesday.
5. Greece won’t be able to get extension of bailout which runs out on Tuesday, as referendum is following Sunday. Ie bailout expires.
6. ECB highly likely to stop emergency liquidity to banks. if capital controls not imposed on Monday, there will probably be bank run.
7. What will referendum question be? “Do you accept creditor proposals”? But effectively “do you want to quit euro?”.
8. if people say they want creditors proposals, not clear they are still on table because programme will have expired.
9. if people vote against Tsipras, he’ll resign. But noone else can form government. So second elections, maybe political paralysis.
10. if people want to stay in €, will be extremely hard after default & capital controls. But national unity govt might just salvage things.
11. if people back Tsipras, hard to see any outcome other than quitting euro. Creditors won’t back down much if at all.
12. A Grexit means more unemployment, poverty, rationing basic commodities, massive devaluation, rising inflation.
13. Whatever happens, this summer’s tourist season will be harmed. If people vote for confrontation, body blow.
14. In short, Greece is staring at a choice between very bad and very very bad.
Reuters, June 27, 2015