Friday 24 November 2017

'The Greek people cannot be terrorised, blackmailed or threatened'

A woman reads a book in the village of Meyisti, on the Island of Kastellorizo, which is the most easterly of the islands in Greece
A woman reads a book in the village of Meyisti, on the Island of Kastellorizo, which is the most easterly of the islands in Greece

Ambrose Evans-Pritchard

Greek voters have rejected the austerity demands of Europe's creditor powers, turning out en masse to vent their anger over six years of economic depression and national humiliation. A volcanic revolt appeared to have swept through the Greek islands.

The shock result effectively calls the bluff of eurozone leaders and the heads of the European Commission and Parliament, forcing them either to back down or carry out drastic threats to eject Greece from the monetary union.

The European Central Bank faces an immediate decision over whether to continue freezing emergency liquidity assistance (ELA) for Greek banks at €89bn, a stance that would amount to liquidity suffocation.

"If they do that, the situation would be very serious," said Euclid Tsakalotos, the country's chief debt negotiator. "That would be pretty close to trying to bring down the government."

The Bank of Greece (BoG) said last night that it would make a formal request to the ECB for fresh support. The EU's leadership was in utter confusion as it became clear during the day that support was swinging back to the No camp, despite blanket coverage from the private TV stations warning that such a vote meant Armageddon.

"The Greek people have proved that they cannot be blackmailed, terrorised, and threatened," said Panos Kammenos, the defence minister and head of the coalition's ANEL party.

Francois Hollande, the French president, said he would bend over backwards to keep Greece in the euro. He is to meet German Chancellor Angela Merkel in Paris today to draw up a joint response to what has turned into the biggest EU fiasco since the rejection of the constitution by France and Holland in 2005.

Martin Schulz, head of the European Parliament, was still insisting that a No vote must mean expulsion from the euro, but his view was becoming untenable.

Jean-Claude Juncker, the commission's chief, is equally trapped by his own rhetoric after warning last week that a No would be a rejection of Europe itself, leading to calamitous consequences.

Syriza officials say they are considering drastic steps to boost liquidity and shore up the banking system, should the ECB refuse to give the country enough breathing room for fresh talks.

"If necessary, we will issue parallel liquidity and California-style IOUs, in an electronic form. We should have done it a week ago," said Yanis Varoufakis, the finance minister. California issued temporary IOUs to pay bills to contractors when liquidity seized up after the Lehman crisis in 2008.

Mr Varoufakis and ministers will hold an emergency meeting tonight with the private banks and the governor of the Greek central bank, Yannis Stournaras, to decide what to do before the cash reserves dry up tomorrow.

Louka Katseli, head of the Hellenic Bank Association, warned that ATM machines would run out of money within hours of the vote.

One official said that Eurobank was "flat out of money" late yesterday, even though Greek depositors have been limited to €60 withdrawals.

There were mounting signs that the creditors were stepping back from the brink, conceding that they might have to renew talks with Syriza.

German officials were briefing last week that Greece would not get another cent as long as prime minister Alexis Tsipras and Mr Varoufakis remained in power.

There is now a clear rift between Germany and France. Emmanuel Macron, the French economy minister, said the EMU creditors were equally to blame for the crisis and must resist the temptation to "crush" the Greek people. "It is our responsibility to avoid a Versailles Treaty within the eurozone," he said.

Yet matters will be decided by a handful of people in Berlin, Frankfurt and Brussels over coming days.

Syriza sources said the Greek ministry of finance was examining options to take direct control of the banking system if necessary rather than accept a draconian seizure of depositor savings - reportedly above a threshold of €8,000 - and to prevent any banks being shut down on the orders of the ECB. Syriza's attitude at this stage is that their only defence is to fight guerrilla warfare.

Hardliners within the party - though not Mr Varoufakis - are demanding the head of the governor, Mr Stournaras, a holdover appointee from the past conservative government.

"The first thing we must do is take away the keys to his office. We have to restore stability to the system, with or without the help of the ECB. We have the capacity to print €20 notes," said one.

Such action would require invoking national emergency powers - by decree - and 'requisitioning' the Bank of Greece for several months.

Officials say these steps would have to be accompanied by an appeal to the European Court: both to assert legality under crisis provisions of the Lisbon Treaty, and to sue the ECB for alleged "dereliction" of its treaty duty to maintain financial stability.

Mr Tsakalotos said that creditors would be in a morally indefensible position if they refused to listen to the Greek people, especially since the IMF last week validated Syriza's claim that Greece's debt cannot be repaid.

"It would be a pretty extreme position for Europe to say that the vote didn't matter. That is not what they did when Ireland voted No to the Lisbon Treaty," he said.

Syriza were the outsiders shaking up a fossilised system, he said.

"Even if they forgave all the debt and gave us €300bn, we would still be in deep trouble, if we didn't push through deep reform. No one in Syriza thinks that everything was hunky-dory in 2008 and we all can go back to that," he said. (© Daily Telegraph, London)

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