01/07 – pan-EU reaction to Greece’s latest gambit

Greece has missed the deadline and failed to repay a €1.6 billion loan to the IMF and, according to the WSJE; Greece is therefore set to become the first advanced economy to default on an IMF loan. Eurozone finance ministers rejected a last-minute appeal by Greek Premier Alexis Tsipras to extend his country’s bailout just hours before it expired, denying Athens a lifeline as its financial system teeters on the brink of collapse, media widely report.

In a hurriedly-organised conference call, the ministers also reacted coolly to an unexpected request from Mr Tsipras for a third bailout, a request Les Echos describes as “another surrealistic move,” while – at the climax of the Greek crisis – EC President Jean-Claude Juncker shows, in an interview with Luxemburger Wort, understanding of the population’s difficulties. Athens’s request for a new bailout looked aimed at swaying the ECB board, since without a programme in place and no negotiations under way the central bank might be forced to take a tougher line, the Financial Times reports, adding that the bailout that Mr Tsipras is proposing would cover Greece’s needs for the next two years, according to a letter from the Greek Premier obtained by the newspaper.

German Chancellor Angela Merkel, Nepszabadsag reports, rejected further talks about the Greek reform programme ahead of the referendum, and German media focuses on Angela Merkel’s strategy in the Greek crisis. German opinion polls actually show that the people of the country stand firmly behind Angela Merkel’s resistance to Greece’s demands, and her stance that if the country is to remain in the eurozone it must implement unpopular economic overhauls called for by its creditors, the WSJE reports. Greece will get no further eurozone bailout loans while Alexis Tsipras and Yanis Varoufakis remain in power, because Germany will block any such deal, a senior German conservative even tells The Times.

Under the rules of the European Stability Mechanism, the euro’s bailout fund, the German parliament, or Bundestag, has a veto over any new programme such as that requested by Greece at the 11th hour. If Greece’s Prime Minister and Finance Minister remain in office, even after a “Yes” vote in Sunday’s referendum, then Athens would stand no chance of a new bailout, the senior German conservative indicates.

In an article called “Economists consider creditors’ demands unreasonable,” Le Monde stresses that all economists, however, agree that the creditors are minimising the Greek recession. Natixis Chief Economist Patrick Artus sums up the dominant thinking, saying that “no serious economist can endorse the lousy and very unreasonable plan” posted on the European Commission’s website on 28 June. In Handelsblatt, Jan Mallien comments on the ELA credits from the ECB to Greece. This Wednesday, the council of the ECB will meet to discuss further dealings with Greece. Mr Mallien states that it would be wrong to increase loans to the Greek banks. It would also be negligent to further expand the credits as this would make a Grexit more expensive for the ECB. According to Mr Mallien, the ECB should freeze the credits until Sunday and make it clear that voting “No” in the referendum would lead to the ECB “pulling the plug” and cutting back the credits.

In an editorial Handelsblatt, Jan Hildebrand addresses the “European propaganda battle” surrounding the Greek referendum, with EC President Jean-Claude Juncker asking the Greek population to vote “Yes” no matter how the question is formulated. At an International Press Association event in Brussels, Mr Juncker told journalists, without any other explanation, that they will see things in Greece on Sunday that will surprise them, Alpha TV notes, stressing that this statement can be interpreted as a sign that Mr Juncker expects a big victory for the “Yes” side in the Greek referendum. The events in Greece promise still more surprises, Inna Šteinbuka, Head of the EC Representation in Latvia, also said at the interview with LTV1.

Het Financieele Dagblad further reports, in an op-ed piece by Jaap Hoekstra, that Tsipras’ initiative threatens to result in a completely unworkable system of government in Europe. There is no mention of a referendum in the Lisbon Treaty. It does speak of the fact that a member state can exit the EU unilaterally, but a similar provision for leaving the EMU is lacking. Member states can only leave the euro if they also leave the EU. Until now, the referenda have been used to give democratic clout to certain choices member states occasionally make regarding the EU, but in the case of Greece it is not presenting a finished question to the Greek voters. They are simply being used as a bargaining tool to strengthen the Greek position in negotiations with the EU. If every member state were to abuse referenda like this, it would make getting anything done within the EU impossible.