Monday 20 November 2017

Greece's parliament vote in favour of holding July referendum

Greek Prime Minister Alexis Tsipras is seen on a television monitor whille addressing the nation early June 27 REUTERS/Pool
Greek Prime Minister Alexis Tsipras is seen on a television monitor whille addressing the nation early June 27 REUTERS/Pool

Greece's parliament voted in favour of holding a July 5 referendum on creditor proposals for reforms in exchange for loans, with the country's future in the eurozone looking increasingly shaky.

Prime Minister Alexis Tsipras' surprise call in the early hours of yesterday for a vote stunned Greece's international debt negotiators.

The country took a big step closer to leaving the euro currency union after fellow eurozone member states refused to extend its bailout programme past its expiry date on Tuesday, leaving Greece on the brink of financial chaos.

In the streets of Greece, worried people queued outside banks for cash from dawn to dusk after Mr Tsipras' announcement, after billions of euro had already been emptied in the preceding weeks.

Greek State Minister Nikos Pappas talks to journalists outside the Maximos Mansion in Athens, Greece REUTERS/Alkis Konstantinidis
Greek State Minister Nikos Pappas talks to journalists outside the Maximos Mansion in Athens, Greece REUTERS/Alkis Konstantinidis
Greek ministers leave the Maximos Mansion after a governmental council in Athens, Greece REUTERS/Marko Djurica

Greece has a €1.6bn debt due to the International Monetary Fund on Tuesday and its bailout programme expires the same day, after which it is unclear how the country might survive financially.

Read more: Europe is heading into uncharted waters - Noonan

The referendum is set for next Sunday with the question on whether to accept proposed reforms needed to get bailout loans from other eurozone countries and the IMF. The government is advocating a rejection of the proposals.

The radical left-wing leader accused the creditors of using blackmail and ultimatums against his proud but struggling people.

European officials and all Greek opposition parties except the extremist far-right Golden Dawn party called his move for a vote a foolish and rash gambit that effectively ended negotiations to keep Greece financially afloat.

The sudden move comes after five months of negotiations, with Mr Tsipras accusing creditors of trying to strong-arm his country into taking harsh austerity measures.

He says the measures would hammer an economy already on its knees after months of creditor-demanded spending cuts and tax hikes.

"They didn't ask us to agree, they asked us to surrender our political dignity," he said during a tumultuous and nearly 13-hour parliamentary session that cumulated in a vote just before 3am local time today.

Out of parliament's 300 MPs, 178 voted in favour and 120 against, with two people absent.

He insisted the Greek side had "exhausted every limit" of concessions so there could be an agreement, adding that "perhaps some saw that as a weakness".

The referendum move further crumbled already strained relations between Greece and its European partners.

Mr Tsipras said the Greek people would vote against a deal next Sunday.

"This no will also be a big yes, a big yes to the decision of the Greek government to reject an ultimatum that insults the Greek people."

Eurozone finance ministers earlier rejected Greek finance minister Yanis Varoufakis' request for a one-month extension to the bailout programme.

Mr Varoufakis then left the meeting, saying: "It's a sad day for Europe, but we will overcome it."

Read more: Last chance to save Greece from the abyss as tempers fray

The other 18 finance ministers then huddled without him to assess how to minimise the damage from the Greek crisis on their currency.

"Our institutions are and will be prepared to take any action if needed," said senior eurozone official Jeroen Dijsselbloem of fears that financial turbulence might extend to the rest of the currency bloc.

Fellow ministers spoke candidly about the risks of a Greek exit from the euro in a way that would have been inconceivable only weeks ago.

The ministers stressed Greece remained in the eurozone for now, and Mr Dijsselbloem said "the eurogroup stands ready to reconvene to take appropriate decisions where needed, in the interest of Greece as euro area member".

Without a bailout programme extension or more loans from creditors, Greece is likely to be in arrears on a debt payment due the same day. Its banks face the risk of collapse.

France's finance minister, Michel Sapin, stressed a deal was still possible and that he was ready to act as a go-between among Greece and the creditors after relations neared a breaking point.

Now much will depend on whether the European Central Bank will accept to continue to prop up Greek banks even after the country's bailout programme expires.

Read more: Greek tragedy: nation lives out drama, one act at a time

It would be under huge pressure to stop using eurozone taxpayer money to keep alive the banks if there is no prospect for a deal.

The eurozone finance ministers suggested Greece should take steps to stabilise its financial system - code for putting limits on cash withdrawals and money transfers.

If Greece's banks collapse, the government would have to support them itself. Penniless, it would have to revert to printing a new currency, effectively drawing the country out of the euro union.

An exit from the euro would put Greece through a new era of economic pain.

With the new currency less valuable than the euro, the government would have to write off a chunk of its foreign loans - mainly owed to eurozone countries - and many companies and households would go bankrupt.

Experts predict a long and deep recession in a country that has already been through five years of economic depression.

The uncertainties of all this would hit European and global markets, though experts are divided on the extent.

Some say Europe is better equipped to handle a Greek euro exit, but others say it is unclear what might happen. The euro dropped in value slightly on international markets after the referendum was called.

Press Association

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