Tuesday

9th Aug 2022

Greece nears euro exit, as bailout extension refused

  • Dijsselbloem: The Greek government will have a 'big problem of risk management' (Photo: consilium.europa.eu)

Eurozone finance ministers on Saturday (27 June) refused to extend Greece’s bailout to accommodate its referendum next weekend, plunging the single currency area and Greece itself into legal and political uncertainty.

“The current financial assistance arrangement with Greece will expire on 30 June 2015,” said a Eurogroup statement following a two-hour meeting.

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  • Varoufakis (r): Decision will 'damage the credibility of the eurogroup' (Photo: consilium.europa.eu)

Tuesday is also the day that Greece is supposed to pay €1.6 billion back to the International Monetary Fund.

In a first for the euro ministers' forum, the statement was signed only by 18 members with a footnote saying that it was supported by all “except the Greek member”.

The eurogroup meeting then reconvened on Saturday afternoon without Greek finance minister Yannis Varoufakis.

Eurogroup chief Jeroen Dijsselbloem said he is “very negatively surprised” by the Greek government’s abrupt decision, on Friday, to reject the latest proposals by creditors and instead ask the Greek people in a referendum for their view on the package.

“The door was still open,” said Dijsselbloem referring to the fact that negotiations between the two sides were still going on, on Friday evening.

He noted that the Greek representatives “were called out and had to leave the meeting” and that this “brought the talks to an end”.

Dijsselbloem said he “very, very much regretted this” and said that the government will have a "big problem of risk management".

The move now means that Greek people will be voting on proposals for a bailout programme which no longer exists.

Reflecting on what it would mean if the Greek people say Yes, the Dijsselbloem noted that Varoufakis said the government - which is advising a No vote – would immediately implement the package.

However, Dijsselbloem indicated it would be unrealistic for Athens to try and put in place a programme without political “ownership”.

“If a government has spoken so negatively about the package then there is little credibility,” he said.

Dijssebloem also dodged the question on whether the European Central Bank will continue its lending to Greek banks, saying it is something that the Frankfurt-based bank has to answer.

The issue comes amid reports in Athens that there are long queues at cash machines – and amid signs that other countries are already publically thinking of the implications of a bank run or of Greece leaving the Eurozone.

Belgian media reported that the country’s foreign office has changed its travel advice for Greece, noting that travellers to the country should take adequate travel insurance and enough cash.

Varoufakis, for his part, said the refusal by the eurogroup to grant a bailout extension "will certainly damage the credibility of the eurogroup as a democratic institution".

He said the creditors' conditions for releasing €7.2bn in aid - proposals that Greeks are now to vote on - were "seriously recessionary" and the numbers "didn't add up".

He also said that the vote is not about euro membership amid fears that the referendum will have repercussions that Athens cannot control.

"Anyone who says this referendum is about the euro is putting a very shaky interpretation on a clear fact - there are no provisions for exit from the monetary union", he added.

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