Why Greece's spillover across euro area will probably be contained this time

[greengiraffe]

Greek default: Tsipras’ new bailout proposal falls short of demands
GABRIELLE STEINHAUSER THE WALL STREET JOURNAL JULY 02, 2015 5:59AM

Defiant Greek PM pushes bailout referendum
New Greek bailout falls shortAlexis Tsipras addresses the nation, vowing to push ahead with the controversial bailout referendum. Source: AFP
Eurozone officials dismissed a new Greek proposal for budget cuts and policy overhauls as insufficient and said that the currency bloc’s finance chiefs wouldn’t hold any more talks on a rescue for Athens until the country holds its referendum on creditors’ conditions for aid on Sunday.

Officials in Brussels said the proposal, received Tuesday night by the representatives of Greece’s official lenders, appeared to fall short of creditors’ demands. Greece defaulted on a €1.55 billion ($1.72 billion) repayment to the International Monetary Fund on Tuesday.

German Chancellor Angela Merkel also reacted coolly to Greece’s new offer, emphasising that Berlin would maintain its tough stance on bailout terms for Greece and was prepared for a battle. Ms. Merkel and other senior officials have said that Germany would discuss a new bailout request only after Greece’s referendum on the creditors’ conditions for aid had taken place, or if Greece called it off.

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“A compromise at any cost would only be a result to get a result, only because one isn’t able to live with a conflict because one is afraid to fight the battle,” Ms. Merkel said.

The eurozone’s finance chiefs also agreed in a Wednesday teleconference to hold off on further negotiations until after the snap Greek referendum, which is set to take place Sunday.

“Given the political situation, the rejection of the previous proposals, the referendum which will take place on Sunday and the ‘no’ advice of the Greek government, we see no ground for further talks at this point,” said Dutch Finance Minister Jeroen Dijsselbloem, who presides over meetings of the currency bloc’s finance ministers.


Greece’s finance minister Yanis Varoufakis, though, said that the other finance chiefs had said that “Greece’s proposal is in the right direction, but asked for more details on its fiscal effect.”

In a televised address, Greek Prime Minister Alexis Tsipras remained defiant, vowing to push ahead with the referendum and calling Greeks who vote “yes” in Sunday’s vote accomplices to those looking to continue the painful policies of austerity in the crisis-stricken country. The premier has argued that a “no” vote would give Greece leverage in talks with its creditors, while eurozone officials have countered that it would be tantamount to a vote to leave the euro.

“A ‘no’ vote is a decisive step for a better agreement, which we aim to sign straight after the referendum,” Mr. Tsipras said. “ ‘No’ does not mean a rupture with Europe.”

Earlier in the day, Germany’s finance chief, Wolfgang Schäuble said that this week’s turmoil — including the closure of Greek banks, the expiration of the bailout program, and the decision to call a referendum — have changed the circumstances too much for bailout talks to simply be resumed from where they were when negotiations broke down on Friday.

Mr. Schäuble said that Greece’s left-wing government had to provide more clarity on its demands before negotiations about further financial aid could resume. The letter sent Tuesday hadn’t done that, he said.

“This is no basis for serious” negotiations, said Mr. Schäuble during a news conference on the government’s 2016 budget. “First of all, Greece has to declare what it wants.”

Markets were nevertheless cheered by the latest offer as a sign that a deal was still possible. The Stoxx Europe 600 opened higher and extended gains sharply. Bonds yields fell in Italy and Spain, highly indebted countries that in past years were seen as vulnerable to spillover from Greece.

The rally extends a roller-coaster ride for European stocks over the past month. As hopes for a Greek deal have ebbed and flowed, markets have been hit by large daily swings.

The Greek premier’s proposals was contained in a two-page long letter dated June 30 to the heads of the three institutions that oversee the bailout — European Commission President Jean-Claude Juncker, European Central Bank chief Mario Draghi and IMF Managing Director Christine Lagarde.

In the letter seen by The Wall Street Journal, Mr. Tsipras offered to accept a draft proposal disclosed on the commission’s website this weekend with a handful of changes. The commission said the proposal was being discussed by negotiators Friday night, just before Mr. Tsipras announced the referendum.

Mr. Tsipras says Athens would accept the reforms of Greece’s sales tax with the exception of a special 30% discount for Greek islands, many of which are in remote and difficult-to-supply regions, which he insisted be maintained.

In the letter, whose existence was earlier reported by the Financial Times, Mr. Tsipras also requests a move of the retirement age to 67 by 2022 to begin in October, rather than immediately, and that a supplementary payment to the poorest pensioners be phased out more slowly.

European officials said the proposal didn’t match what creditors were seeking. “He repeated the same-old known issues,” an EU official said. It is “too little, too late.”

A senior Greek government official said that the Greek government wasn’t planning to send additional proposals with more concessions Wednesday.

The EU’s vice president for the euro, Valdis Dombrovskis, said a deal on a new bailout is possible before big new debt repayments are due, but stressed it would take some time. The next big payment is July 20, when €3.5 billion in Greek government bond held by the European Central Bank come due.

Europe’s rights watchdog said Wednesday that the referendum planned for Sunday — in which the government had asked its citizens to vote against pension cuts and sales-tax increases — isn’t in line with European standards.

“The referendum has been called on such a short notice — that this in itself is a major problem,” Thorbjorn Jagland, the secretary-general of the Council of Europe, said in an interview with the Associated Press. The comments were confirmed by Mr. Jagland’s spokesman, Daniel Höltgen.

The warning doesn’t have any legal consequences and doesn’t provide a basis for a legal challenge, but it raises further doubts about the vote. European policy makers have been arguing the documents put to the vote don’t reflect the latest stance in the negotiation. They have also warned that because the old bailout has now expired, a new rescue program would require a new round of negotiations and likely additional conditions.

In the first poll published since Mr. Tsipras called the vote, 46% of those surveyed said planned to reject the creditors’ bailout terms in the referendum, compared with 37% who said they backed the “yes” vote. The rest said they were undecided. Support for the “no” vote had been much higher, at 57%, before Greek authorities imposed capital controls, according to pollster ProRata, which conducted the survey. The poll was published in the daily newspaper Efimerida ton Syntakton.

The Wall St Journal

[cfa]

Greeks will vote ‘Yes’ over bailout terms, polls and bookmakers suggest

http://rt.com/business/271183-greece-ref...forecasts/

[greengiraffe]

Greek crisis: people suffer as economy teeters on brink of collapse
THE AUSTRALIAN JULY 04, 2015 12:00AM

Adam Creighton

Economics Correspondent
Sydney
   Source: TheAustralian < PrevNext >
••

“The Greek Ministry for Tourism does not anticipate any disruptions in visitors’ holiday experiences, neither on the islands nor in mainland Greece.”

The Greek government was at pains this week to reassure its annual throng of summer visitors that their credit and debit cards would be fully functional.

“Greeks have become second-class citizens in their own country; people are waiting at five minutes to midnight to get their next day’s maximum €60 withdrawal,” says Angelos Frangopoulos, chief executive of Sky News, in Athens on a family holiday.

“ATMs have become social gathering places, places where queues of 30 people are furiously talking politics.”

Greece is in the throes of a humiliating and devastating depression, its banks on the brink of collapse and its population shrinking while its government is on the verge of printing a new currency, unable to meet its obligations.

Greek unemployment has soared to more than 25 per cent since 2010, and double that rate for young people. Over the same period its economy has shrunk by a quarter as its public debts have swelled from 110 per cent of GDP to almost 180 per cent.

This weekend’s referendum is being heralded as a circuit-breaker, a vote for or against membership of the euro area, whatever the fine print of the actual question. But ongoing Greek suffering is tragically inevitable. A vote in favour of the agreement negotiated in Brussels last week — which Greece’s own left-wing government has disavowed — will ensure further budget cuts and tax increases, bolstering for some time at least the monetary straitjacket that has throttled Greece’s economy for years.

A ‘‘no’’ vote could usher in a more competitive new currency, but would be a risky leap into the unknown for a country with military dictatorship in its recent past, a potential recipe for destabilising inflation and wholesale debt default that could cripple any reform efforts and banish Greece from international relations for a generation.

No nation has ever failed to repay the IMF. Greece owes it €21 billion, and €400bn is owed by its government and central bank to various European institutions.

“It is hard to see how the Greek state has any option but to announce a redenomination into a newly launched currency, and to nationalise the banks in this scenario,” said JP Morgan analyst Malcolm Barr this week.

“From talking to people there’s a strong sense of ‘no’ on the islands, but in central Athens at least people tend toward ‘yes’,” notes Frangopoulos, reflecting the ambivalent polling this week.

Greece — with an economy smaller than Victoria’s — has captivated the world for a week, but financial markets, or the broader euro bloc, should have little to fear. Greece’s economy is barely 3 per cent of the euro area. Its creditors are largely sovereign governments, the IMF and the European Central Bank, meaning any losses won’t hurt the banking system. And the yields on Spanish and Italian 10-year government bonds have stayed under 2.4 per cent, a manageable level and one suggesting the ECB is successfully burning any short-selling with its unlimited money pump.

Greece’s predicament stems from at least three very poor decisions, made by people who don’t have to bear the consequences. The first was joining the euro area in 2002. “Greece stood out as a poor candidate as its structure doesn’t fit well with Europe. There needs to be similarity in the rate of productivity growth, in the exportable growth in exportable commodities,” says Charles Calomiris, a former adviser to the European Commission and economics professor at Columbia.

Greece’s economy was an aberration within the emerging euro area. Output per hour worked in Spain and Italy, among the euro bloc’s less productive nations, was more than 40 per cent higher than in Greece.

Banks such as Goldman Sachs had helped Greece present its financial accounts in a more favourable light so it could join, but the lack of fit should have been clear.

The Greek government had consistently run budget deficits of about 6 per cent of GDP in the lead-up to the financial crisis, pouring borrowed money into public sector salaries, pensions and enriching favoured constituencies. Private and public consumption combined had soared to 90 per cent of GDP by the time the crisis hit in 2009, the highest in the advanced world.

In such circumstances economics argues for separate currencies, so prices and wages — which are notoriously sluggish, especially in the downward direction — do not have to adjust to reflect the differences in productivity.

Greek productivity levels might have caught up had the country shown some inclination to reform. Immediately after the financial crisis former eastern bloc countries Latvia and Estonia drastically slashed spending and took steps to liberalise their economies.

“And that sort of reform would need to include labour and competition laws, getting rid of corruption (another form of tax), and court reform, not only fiscal reforms,” Calomiris says.

As Henry Ergas chronicles in this week’s Inquirer, Greece has dragged the reform chain pretty much ever since it became a democracy in 1975. State spending surged from a relatively lithe 35 per cent of national income in 1980 to a ludicrous 50 per cent in 2008. With little concrete to show for it, the country’s public debt as a share of national income rose from 22 per cent (around Australia’s level today) to 110 per cent by the time of the financial crisis.

By way of example, in 2012 Greeks on average wages could expect a guaranteed government-funded retirement pension equivalent to 110 per cent of their final salary, the highest replacement rate in the 34 advanced nations in the OECD, and around double the average replacement rate. That sort of luxury could never be sustainable.

The final and most recent error was European authorities’ decision throughout 2011 and 2012 to take on practically all the debt. This emphasised the political dimension of what should and could have been an economic problem. Greece had defaulted numerous times since the early 19th century, and could have defaulted on swathes of the loans again.

The multinational banks (largely French, German and Wall Street) that shovelled money at Greece at ludicrously low interest rates (Greece’s borrowing costs collapsed from 20 per cent before joining the euro to about 3.5 per cent after) managed to foist all their loans on to European institutions. The banks foreshadowed a financial meltdown if they had to endure the losses on their already fragile balance sheets (there was no offer to repay the prior profits on the loans, however, which in any case had already been paid out in bonuses and dividends before the GFC).

“By bailing out the banks through the Greek bailouts, the public was not aware of what was going on and everyone avoided having to face any questions about why the banks were so weak, and why there was zero risk weight for lending to the Greek government and thus no skin in the game,” says Anat Admati, a professor of finance at Stanford University.

Admati is referring to financial regulations that assumed lending to governments, even one with the track record of Greece, was in effect riskless and required no capital provision.

Since 2012 European institutions have held around 80 per cent of Greece’s sovereign debt. More of Greece’s debts should have been written down earlier. European governments have used taxpayers’ money to bail out the banks that imprudently made the loans, and now they want their money back. A Greek default has massive ramifications for the political fortunes of ruling parties of France and Germany in particular, which directly and indirectly funded the bulk of Greece’s bailout.

Calomiris reckons Greece still has a chance to stay in the euro area, if it immediately balanced its budget (which is still in deficit). “They would also need to pass laws that all contracts and prices — wages, loans, pensions, everything — are reduced by say 30 per cent,” he says.

For Calomiris, Greece’s debt saga is a minor prelude to potentially more damaging ruptures in the euro area. “Italy and Spain aren’t the real issue; France is the country of greatest concern,” he says. As for Greece in 2008, French public spending is 50 per cent of GDP. Some banks might be too big to fail; countries such as France, owing more than €2 trillion, are too big to save.

[greengiraffe]

YES OR NO WHY GREECE CAN'T WIN
1726 words
4 Jul 2015
The Australian Financial Review
AFNR
English
Copyright 2015. Fairfax Media Management Pty Limited.

Referendum Away from the protests, there's an eerie quiet on the streets as nervous Greeks batten down for Sunday's crucial vote, writes James Chessell in Athens.

Siarkos Dimitris does not hesitate when asked which way he will vote in Sunday's critical referendum on the terms of the European bailout deal. "I am voting no. I want us to be an independent country," the 44 year old says. "I believe the people should decide the future of this country alone, not with others guiding us. I am not afraid of us going out of Europe."

Dimitris lost his job in a car-importing business in 2010 and has been unable to find work since. He is part of the crowd milling around on a hot Thursday afternoon outside the Greek Parliament building in Syntagma Square, which has become a venue for almost nightly protests about the economic crisis gripping the nation.

Dimitris is not alone in backing the oxi (no) campaign. Opinion polls suggest the gap between yes and no is so narrow that the result is too close to call.

It is five years since Greece accepted its first multibillion-euro bailout package from the 18 other members of the common currency, yet the unemployment rate remains above 25 per cent, while public sector wages have been cut by about a third. The bailout came with strings attached in the form of tough reforms to pensions, taxes and public institutions which have proved exceedingly unpopular.

Whether the Greek recession is the fault of creditors for imposing too much austerity too quickly, or Athens for failing to make genuine economic reform, is a matter of considerable debate. What is clear is that many ordinary Greeks in Syntagma Square have had enough.

"I don't want my country to be taxed again and again for the good of some German businessman," says 22-year-old Marcus Chouseinis, who earns about €400 ($585) per month working in a coffee shop. "There will be risks because if you leave the eurozone you leave a big alliance. But if we leave I'm sure the government will go with [US president Barack] Obama or the Russian government with a new alliance."

Nearby, a Communist Party rally is under way. Magda Tsakiltsidi, 23, a student who works part-time in her mother's bakery, is taking part. She says the past five years have been "very, very tough. It is hard to find work. I am looking abroad for opportunities."

Greek Prime Minister Alexis Tsipras stunned the world last weekend when he effectively ended months of fractious negotiations between Athens and its creditors by calling a referendum to decide the economic reforms attached to the latest bailout deal. On a technical level, the snap poll is meaningless; the bailout expired on Tuesday at the same time Greece became the first developed nation to default on a payment to the International Monetary Fund. Nor does the complicated 72-word question make mention of Greece's membership of the eurozone. But in reality, the vote is incredibly significant.

Greece could wave goodbye to the euro and even the European Union if voters choose no. A strong showing for the yes camp means Tsipras' ruling left-wing Syriza party - which is backing a no vote - will have to call an election. Not only will the result set the tone for future attempts to solve Greece's debt woes but it could put the European project and its goals of stability, unity and prosperity at risk.

"It is going to be a very close fight," says Miltos Kyrkos, a member of the European Parliament with centrist party To Potami (The River). Kyrkos initially supported Tsipras when it looked as if a compromise deal could be struck with Greece's three bailout monitors, the IMF, the European Central Bank and the European Commission. Indeed, neither sides was that far apart in early June before falling out spectacularly over a few key measures such as sales tax hikes and cuts to Greece's generous pension system. Tsipras has accused the creditors of blackmail, while IMF head Christine Lagarde complained the discussions require "adults in the room".

But Kyrkos is scathing about the decision to call the referendum, arguing Syriza misjudged the resolve of the creditors. "Even if a yes comes out, a new deal would be worse than the one we had. It is almost criminal, this decision," says the chemical engineer.

"For Greece to drift out of the eurozone [with a no vote] would be a disaster. We import 80 per cent of what we consume. We produce almost nothing. The private sector would collapse almost completely."

Pro-Europeans such as Kyrkos hope that, faced with a hard choice, Greeks will stick with the euro. The yes camp is fractured and lacks a presence in Athens, where oxi posters are ubiquitous. But it takes heart from a narrowing in the poll numbers during the week after capital controls were imposed on Greek lenders. With most banks closed and daily withdrawals from ATMs limited to €60, Greeks have been forced to line up for cash every day.

Greek news reports have shown footage of a crowd of pensioners pushing and shoving outside one of the branches that was reopened to allow people without ATM cards to make withdrawals. These scenes will spook some voters. During European parliamentary elections three years ago, Greeks backed anti-austerity parties in a first round of polling but then switched to more EU-friendly MPs in the second when it appeared a "Grexit" was possible.

Outside a shuttered Alpha bank in central Athens, Enri, who did not want to give his full name, complained it was getting to the point where it was impossible to withdraw €60 because some machines were running out of €20 notes. "It is actually turning into a €50 limit," he says. "I would have voted yes anyway, but this kind of trouble makes me know I am doing the right thing."

The impact of the capital controls goes beyond the queues. Away from the bustling politics of Syntagma Square, the capital is quiet. It feels like a Sunday or a public holiday. "Yes it is calm," says George Tzogopoulos, a fellow at the Hellenic Foundation for European and Foreign Policy. "There is not so much traffic on the streets. People want to save money and they prefer to stay home and see what will happen."

Outside Parliament, Angelica Kavagia sums up the despodency being felt by others. "I am tired of the EU-situation and the things we have gone through all these years.

"Of course I'm anxious about possibly leaving the euro but ... maybe it is a risk worth taking."

Kavagia and others' patience will be tested in the coming weeks. Syriza claims the banks will reopen after a no vote. But most observers, including Tzogopoulos, believe this is impossible. Greek lenders have survived up to this point because an ECB emergency fund has kept them liquid. The steady stream of withdrawals in the lead-up to the referendum announcement would turn into a full-scale run if the banks opened the day after a no vote. And the ECB will be unwilling to restart its emergency lifeline unless there is preliminary agreement about a new financial rescue package.

At the same time, many poor Greeks continue to suffer. While banks have been closed, special clinics have opened. Paris-based humanitarian organisation Médecins Sans Frontières says the Greek health budget has been cut by almost 40 per cent and state funds for medication have halved since the global financial crisis.

Tsipras and many economists argue the widespread poverty in Greece is the fault of eurozone powers led by Germany. European leaders were wrong to allow an underprepared Greece to join the currency union in the first place more than 14 years ago. And by imposing harsh austerity measures rather than stimulus, economic output has shrunk by 25 per cent since 2010.

This has made it even more difficult for Athens to manage its debt mountain which now stands at 180 per cent of GDP. Yet it is also impossible to ignore the fact Greece willingly signed up for membership and misled the other 18 members of the eurozone about the health of its economy until the GFC made these financial problems impossible to conceal.

"Given the current situation in Greece, it is difficult not to feel for the people and the country," says Perpetual's head of equities, Paul Skamvougeras, whose parents moved to Australia from Greece. "Having said that, this is a situation of their own making. Whether the referendum vote is yes or no, there will be a long, painful period of adjustment required."

The dire state of Greece's finances mean that, regardless of the result, both sides will have to return to the negotiating table.

The IMF warned on Thursday Greece needs more than €60 billion in economic aid over the next three years, arguing it should be granted "comprehensive" debt relief. Tsipras has argued debt relief should form part of any bailout deal. Greece's creditors were only prepared to put it up for discussion once Athens agreed to the austerity measures. Resolving this tension will be a key part of future talks.

The make-up of the negotiating teams will depend largely on Sunday's result. Dimitris Pefanis, a journalist with Greek news website in.gr says one scenario could even be a yes vote that results in an another election which leads to a solid turnout for Syriza. "I think we will see Syriza at the negotiating table in some way," he says.

With no obvious strong opposition leader ready to take the place of Tsipras, Pefanis believes the Greek team could include more technocrats than politicians.

One thing is certain. The next twists and turns in the Greek debt crisis will be impossible to predict with any accuracy. "It's not like before January when governments were mainstream parties and we more or less knew what they would do," says Tzogopoulos. "Now we have a leftist government with unclear ideas and unclear objectives, and that is why I'm afraid I cannot predict. This government had a fresh mandate after January and it failed to renegotiate."


Fairfax Media Management Pty Limited

Document AFNR000020150703eb740001b

[CityFarmer]

Currency traders are standing-by, for the outcome...

Currency traders face shortened weekend as Greek vote looms

SINGAPORE (July 4): Greece’s referendum on Sunday means a short weekend for foreign-exchange analysts and traders, some of whom will rush to their desks even before the official opening for currency trading at 5 a.m. Sydney time on Monday.
...
http://www.theedgemarkets.com/sg/article...vote-looms

[greengiraffe]

Hi CF,

Too much media publicity on Grexit liao... the facts are there... its how Greece goes thru the process before being kicked out IMHO...

Grexit is highly discounted...

Must always stay Confident...
GG

Currency traders are standing-by, for the outcome...

Currency traders face shortened weekend as Greek vote looms

SINGAPORE (July 4): Greece’s referendum on Sunday means a short weekend for foreign-exchange analysts and traders, some of whom will rush to their desks even before the official opening for currency trading at 5 a.m. Sydney time on Monday.
...
http://www.theedgemarkets.com/sg/article...vote-looms

[greengiraffe]

Greek referendum: Is Alexis Tsipras a saviour or an erratic incompetent?
MATTHEW CAMPBELL THE TIMES JULY 06, 2015 12:00AM

There is no sign on the gate and little to distinguish the compound near the airport from any other anonymous warehouse complex. Welcome to “Athens 2”, the secret bolt-hole for businesses fleeing civil unrest in the Greek capital.

Behind high walls and security cameras are empty offices filled with desks and computers. Giant generators are ready to provide “enough power for a small town”, according to director Alexandros Bechrakis.

Several banks and insurance companies have signed agreements allowing them to move in if they are obliged to abandon their Athens headquarters. Inquiries from others have risen sharply in the past few days; and some companies have been testing the facilities in emergency drills.

“If you have a contract with us, you hope you won’t have to use it,” Mr Bechrakis said. “But better safe than sorry.”

As Greece waits for the result of yesterday’s referendum on its future in Europe, people are preparing for the worst: whatever the result of the vote there is a possibility of violent upheaval.

The mood on the street has ­already turned ugly — divisions have grown between rich and poor, young and old, those favouring a “yes” to a deal with Greece’s creditors and those against. A gang used crowbars to dismantle a “yes” campaign kiosk over the weekend.

Youths swarmed through a supermarket throwing anti-austerity leaflets into the air and grabbing food off the shelves. They shared it with passers-by before fleeing.

Police are ready to mobilise in preparation for possible strife under an emergency plan codenamed Nemesis. It allows for the deployment not only of riot police but also of the army.

With the banks shut and about to run out of money, the city of Athens is so worried about tensions bubbling over it has made public transport free until further notice. So, too, are funerals.

European leaders grimly concur that a no to austerity will be followed by Greece’s exit from the single currency. “Yes” campaigners say this would reduce the proud nation to a banana republic and have urged Greeks to take their last chance to stay in the euro.

Yet the leftist government of Prime Minister Alexis Tsipras is gambling on a big no strengthening his bargaining power in Brussels. He assumes that Europe cannot let Greece leave the euro without putting the cherished single currency at risk. Is he deluded?

According to polls, the “yes” and “no” campaigns were neck and neck last week but whoever wins, the outlook is gloomy.

Even with a yes, the country faces years, if not decades, of painful economic adjustment before it can dig its way out of a mountain of debt. That is why so many Greeks feel they have nothing to lose by giving their charismatic young leader the benefit of the doubt.

Mr Tsipras, 40, is a hero to the young, half of whom are unemployed, and to many in a growing army of poor and elderly left to fend for themselves.

Kira Kapiotis, a tall, silver-haired woman of 60, worked until recently as an art restorer at an Athens museum. Now she can barely afford to eat, let alone pay for the new false teeth she needs. “In the past five months my life has been turned upside down,” she said as she waited to see a dentist at a makeshift clinic run by volunteers on a former American airbase near Athens. “I’ve lost 20kg. I wouldn’t go to a soup kitchen, I’m too proud.”

She pointed at her white Prada shoes. “I paid €300 ($443) for them in the days when I could ­afford it. Now I doubt I’d get €30 for them. I’ve already sold my furs. Euro, drachma, it makes no difference to me.”

Sitting near her in the waiting room was Dimitra Papanikolaou, 59 and suffering from breast cancer. She and her late husband used to run a recording company. It went bust when clients stopped paying their bills. “I have to pinch myself sometimes. I still can’t understand how I’ve ended up like this, with so little money and no healthcare. It’s very scary.”

But now she has hope. “Somebody finally stood up to Berlin for us,” she said of Mr Tsipras.

“He is the first to care about us.”

Strutting like a rock star on to the stage at a rally in Athens on Saturday, Mr Tsipras, who rides a BMW motorbike and idolises Ernesto “Che” Guevara, accused the country’s creditors of “blackmail”. He invited his followers to “write a new chapter of history” by voting no.

Mr Tsipras calculates that the EU needs Greece as much as Greece needs the EU and would never put the survival of the eurozone in peril. European diplomats, however, complain that he and Finance Minister Yanis Varoufakis have so alienated creditors — the European Commission, central bank and IMF — that today only France’s Socialist government wants more dialogue if it’s a no.

Other European countries are prepared to let Greece fall out of the single currency, regardless of the damage it might inflict on the EU goal of “ever closer union”.

They are praying for a yes, the resignation of Mr Tsipras and Mr Varoufakis and a resumption of talks with a more co-operative Greek governing team. “It is easy to forget that countries do not speak to countries — it’s people speaking to people and after nearly six months of brinkmanship, trust has been entirely lost,” a senior EU diplomat said.

Whether as part of a cunning plan or an example of his amateurism and inexperience, Mr Tsipras has played an erratic game, charging from one extreme to another. One moment he agreed to bailout terms with the creditors and the next he savaged them for trying to humiliate his country.

His call for a referendum last weekend caught the EU by surprise and was portrayed by some as a gambler’s last throw of the dice. Although the Greek supreme court ruled it could go ahead, the referendum is on shaky ground. The vote is on a draft proposal for a deal that was rejected by Mr Tsipras and withdrawn by the creditors; and apart from the logistical difficulties of organising a vote in only one week, the question on the ballot paper is so complex “you’d need a degree in economics to understand it”, as a 21-year-old policeman put it on Friday.

He had been sent to keep an eye on things outside a bank where a crowd of frightened pensioners had gathered in the hope of withdrawing money.

Olympia, 76, a retired factory seamstress, wiped away tears to ask him what had happened to her pension and how she was expected to survive on just a bit of it. He tried to console her. Then a young man approached her, shouting: “What are you complaining about? Your generation is to blame for electing all those crooked governments that racked up the debt and stole all the money.”

Others vented their fury on the wartime occupiers — Germany.

“I grew up on Lesbos during the war,” said Yannis Nikolaides, 77, a retired gynaecologist. “My first memory is being hit by a German soldier with a cane on the back of the legs when I was four years old. I had walked too close to him. The Germans are inhumane.”

Posters appeared on street corners on Friday bearing the image of German Finance Minister Wolfgang Schauble, who is perceived to have taken the toughest line against Greece in negotiations. “He’s been sucking your blood for five years,” the caption says. “Tell him ‘no’ now.”

The banks may run out of money as soon as today and the government’s coffers are expected to empty, regardless of how people vote. At that point, the government will no longer be able to pay salaries, fuelling the outrage of those reduced to scrounging from loved ones or begging.

A “yes” vote, say European officials, would mean a quick restoration of the European Central Bank’s emergency liquidity assistance, allowing banks to reopen.

A “no” vote would not. Deposits might have to be seized to repay tens of billions of euros the ECB has injected into the system to keep Greek banks afloat.

If the country votes no, Mr Tsipras will try to reopen negotiations with creditors tonight. He is encouraged by an IMF report which said that unless 30 per cent of what it owes is written off, the Greek debt is unsustainable.

He may be disappointed, however. “Nobody believes that Prime Minister Tsipras will stick to an agreement even if he decides to sign up to it,” a European diplomat said. With the creditors ruling out any further assistance in the event of a no, the government will be unable to pay salaries next month.

Shortages of food and medicine could start this week, with bills left unpaid because of bank closures. Greece is self-sufficient in many foods but not meat. Vegetables, too, could become scarce.

Without a financial lifeline, Greece will eventually have to print its own money — the new drachma, perhaps — an outcome favoured by some of the hardliners in the ruling Syriza party. If not, the economy will grind to a halt.

THE SUNDAY TIMES

[greentea]

And it looks like a "no". Euro falls, Aussie dollar drops to six-year low.
Greece heads for 'no' vote, raising risk of exit from Euro: http://btd.sg/1Tesi4A

[greengiraffe]

Just get them out of the way... its not the 1st time they have defaulted just that this time round the situation is a little different due to the Euro link...

Anyway, they will be going through the SOP and IMHO all the stages are part of the script... honestly getting thru the legalities is the tougher and exhausting...

O$P$ is a common scene but the actual resolving of the issues is confusing, complicating and uncompromising...

GG

And it looks like a "no". Euro falls, Aussie dollar drops to six-year low.
Greece heads for 'no' vote, raising risk of exit from Euro: http://btd.sg/1Tesi4A

[CityFarmer]

The vote is 61% "NO", with half of the votes counted...

Greeks defy Europe with overwhelming referendum 'No'

ATHENS (July 6): Greeks voted overwhelmingly on Sunday to reject terms of a bailout, risking financial ruin in a show of defiance that could splinter Europe.

With nearly half of the votes counted, official figures showed 61 percent of Greeks rejecting the bailout offer. An official interior ministry projection confirmed the figure as close to the expected final tally.

The astonishingly strong victory by the 'No' camp overturned opinion polls that had predicted an outcome too close to call. It leaves Greece in uncharted waters: risking financial and political isolation within the euro zone and a banking collapse if creditors refuse further aid.

But for millions of Greeks the outcome was an angry message to creditors that Greece can longer accept repeated rounds of austerity that, in five years, had left one in four without a job. Prime Minister Alexis Tsipras has denounced the price paid for aid as "blackmail" and a national "humiliation".
...
http://www.theedgemarkets.com/sg/article...erendum-no