NEWS

Greece on the brink as Tsipras faces off against Europe on aid

greece-on-the-brink-as-tsipras-faces-off-against-europe-on-aid

Greek and European leaders are dug in before the country’s referendum on austerity, as polls showed the outcome of Sunday’s vote is impossible to predict and what happens afterward even more uncertain.

Officials across Europe say a “no” vote on the bailout terms demanded by creditors would deepen Greece’s economic misery. Greek Prime Minister Alexis Tsipras told supporters Friday night that a “no” vote was the ticket out.

Five months of confrontation have yielded little more than economic malaise and political mistrust. Banks in Greece remain shut, commerce is grinding to a halt and pensioners are coping with rationed payments, giving the country a taste of the looming catastrophe if no aid agreement is reached.

“What is certain is that come Monday, Greece won’t be facing just massive economic problems. It will be a deeply divided country,” said Nikos Marantzidis, a pollster and professor of political science at the University of Macedonia in northern Greece. “Greece is on the brink of a new national schism.”

Divided Nation

Competing demonstrations took over central Athens on Friday night, forcing hotels and shops to pull down shutters and closing main streets. Police estimated both Tsipras’s “no” event, in Syntagma Square, and the “yes” rally at the Panathenaic Stadium each drew more than 20,000. No significant violence was reported.

“On Sunday, we won’t simply be deciding to remain in Europe, we’ll be deciding to live with dignity in Europe,” Tsipras said from a stage in front of the Parliament building. “We’re celebrating overcoming fear, overcoming blackmail.”

At the “yes” event, opposition leader Antonis Samaras said rejecting the bailout would be seen by creditors as a rebuke of the euro itself and would keep banks closed longer.

“There won’t be any happy ending regardless of the outcome,” Sergio Marchionne, the chief executive officer of Fiat Chrysler Automobiles SA, told reporters in Turin. “It doesn’t matter if no or yes wins.”

Greece is split down the middle heading into the vote. A poll commissioned by Bloomberg showed 43 percent intend to reject the budget cuts and tax hikes demanded in exchange for financial aid, while 42.5 percent will accept the conditions.

The survey of 1,042 people conducted by the University of Macedonia had a margin of error of 3 percent.

Voting is open from 7 a.m. to 7 p.m. local time Sunday. The result should be known before midnight. Emergency negotiations will immediately ensue, with Greek banks running out of cash. The European Central Bank will discuss their emergency lifeline on Monday.

In or Out?

Euro-area finance ministers have said they may be ready to start work on a third bailout for Greece even if voters reject their last proposal, according to two officials familiar with negotiations. Greek Finance Minister Yanis Varoufakis said he expects a deal to be done regardless of the result.

Europe may have to get used to Greece being “in bankruptcy” while remaining in the euro, European Union President Donald Tusk said in an interview with Politico.

Financial markets suggest the firewalls built since the debt crisis broke out in Greece in 2010 will hold. Since dropping on Monday after capital controls were imposed by Tsipras, the Euro Stoxx 50 Index has gained, as have 10-year bonds in Italy, Portugal and Spain.

Whatever comes after the referendum, the clock is ticking for Greece. The Athens Chamber of Commerce president estimates that the country has only about 500 million euros in cash reserves left in banks, meaning ATMs will be empty early next week without further ECB aid.

Tsipras on Friday argued that the only way for Greece’s debt to become sustainable is for a so-called haircut on obligations and a 20-year grace period. The International Monetary Fund said in a report on Thursday the country needs 36 billion euros ($40 billion) from its European partners and better terms to stand on its own feet.

[Bloomberg]