Greece Crisis: Cracks Appear In Franco-German Axis as European Leaders Remain Divided Over Country's Fate

Oh boy.

And here I thought they had a breakthrough at the end of last week.

Looks like Merkel's standing firm against no easy Greek bailout.

Guten Tag!

At the Telegraph UK, "French president Francois Hollande dismisses idea of temporary Greek exit as Slovakia and Finland say little chance of a deal today after EU leaders summit is cancelled."



Also at Euronews, "Eurozone leaders are telling Greece it has to restore trust by enacting key reforms before talks can open on a new financial rescue package to keep it in the single currency."

Twilight of the Euro Welfare State?

Well, as I was saying a little while ago.

From Holman Jenkins, at the Wall Street Journal, "Twilight of the Euro Welfare State?":

Journalists have strained to apply their good guy-bad guy conventions to the Greek crisis. But are the bad guys the greedy, wastrel Greeks? Or are the bad guys the imperious, demanding Germans?

In fact, this narrative is a poor construction. What we’re seeing is less a story of good guy-bad guy than a terminal falling out among Europe’s club of welfare states over the inevitable problem that eventually other people’s money (in Margaret Thatcher’s phrase) runs out.

The Greek combination of welfarism-plus-cronyism, with a large helping of outright corruption, has long relied on other people’s money from abroad to make ends meet. But if the terms imposed by fellow Europeans for fresh loans-cum-aid have lately seemed intolerable to Greek voters, they still took the availability of fresh loans for granted. This week they are learning their right to their neighbors’ money is not automatic after all—and yet, for reasons we’ll get to, don’t be surprised if there’s an 11th-hour bailout.

Let us not kid ourselves, the way many Europeans are kidding themselves, that Greece is entirely unique. Portugal, Italy and Spain—“core” European welfare states—already have made the same transition to dependence on external “other people’s money” to uphold their welfare systems.

Their version of other people’s money is Mario Draghi’s implicit promise to tax all Europeans with future inflation (a promise that remains implicit at this point) to keep their welfare states afloat. If not for the European Central Bank’s promise, these governments likely would already be in the same position as Greece—unable to finance their deficits.

As long as Mario Draghi is on the job, there should have been no dramatic, visible “contagion” from the Greek crisis. And there hasn’t been, for the same reason there was none from the Cyprus crisis two years earlier. There is no “surprise” involved: The markets had already fully internalized that Greece and Cyprus were outside the circle of Mario’s magic guarantee, so there is no reason their default need be seen as heralding other defaults.

But the fundamental long-term problem still remains: How will France and Italy especially (the key too-big-to-fail economies) find their way back to reliance on internal taxation plus voluntary, market-based lending to keep their welfare states up and running? Is this even possible in a democratic political system with large, calcified interest groups? Then again, if European states are already maximizing their option to avoid reform, might not the feared triumph of populist parties in future elections actually be a good thing, producing a crisis that forces action?

Well, Germany has a robust, export-led industrial economy that generates enough wealth to support its welfare state (for now, at least). France, not so much.

But keep reading, in any case.

Far-Left Scholars Slam Angela Merkel in 'Open Letter' on Greece: 'Austerity Has Failed'

Actually, the socialist welfare state has failed, with Greece being Exhibit A.

But when you've got folks like Fidel Castro and Vladimir Putin propping up Greek Prime Minister Alexis Tsipras, you know the left sees an opening to bring down the leading capitalist oppressors in the Western camp.

From Thomas Piketty , Jeffrey Sachs , Heiner Flassbeck, Dani Rodrik, and Simon Wren-Lewis, at the Nation, "Austerity Has Failed: An Open Letter From Thomas Piketty to Angela Merkel":

As most of the world knew it would, the financial demands made by Europe have crushed the Greek economy, led to mass unemployment, a collapse of the banking system, made the external debt crisis far worse, with the debt problem escalating to an unpayable 175 percent of GDP. The economy now lies broken with tax receipts nose-diving, output and employment depressed, and businesses starved of capital.

The humanitarian impact has been colossal—40 percent of children now live in poverty, infant mortality is sky-rocketing and youth unemployment is close to 50 percent. Corruption, tax evasion and bad accounting by previous Greek governments helped create the debt problem. The Greeks have complied with much of German Chancellor Angela Merkel’s call for austerity—cut salaries, cut government spending, slashed pensions, privatized and deregulated, and raised taxes. But in recent years the series of so-called adjustment programs inflicted on the likes of Greece has served only to make a Great Depression the likes of which have been unseen in Europe since 1929-1933. The medicine prescribed by the German Finance Ministry and Brussels has bled the patient, not cured the disease.

Together we urge Chancellor Merkel and the Troika to consider a course correction, to avoid further disaster and enable Greece to remain in the eurozone. Right now, the Greek government is being asked to put a gun to its head and pull the trigger. Sadly, the bullet will not only kill off Greece’s future in Europe. The collateral damage will kill the Eurozone as a beacon of hope, democracy and prosperity, and could lead to far-reaching economic consequences across the world.

In the 1950s, Europe was founded on the forgiveness of past debts, notably Germany’s, which generated a massive contribution to post-war economic growth and peace. Today we need to restructure and reduce Greek debt, give the economy breathing room to recover, and allow Greece to pay off a reduced burden of debt over a long period of time. Now is the time for a humane rethink of the punitive and failed program of austerity of recent years and to agree to a major reduction of Greece’s debts in conjunction with much needed reforms in Greece.

To Chancellor Merkel our message is clear; we urge you to take this vital action of leadership for Greece and Germany, and also for the world. History will remember you for your actions this week. We expect and count on you to provide the bold and generous steps towards Greece that will serve Europe for generations to come.

Sincerely,

Heiner Flassbeck, former State Secretary in the German Federal Ministry of Finance

Thomas Piketty, Professor of Economics at the Paris School of Economics

Jeffrey D. Sachs, Professor of Sustainable Development, Professor of Health Policy and Management, and Director of the Earth Institute at Columbia University

Dani Rodrik, Ford Foundation Professor of International Political Economy, Harvard Kennedy School

Simon Wren-Lewis, Professor of Economic Policy, Blavatnik School of Government, University of Oxford

Interesting, but it's not all Germany's fault.

The world historical ideological battles over this are pretty entertaining, though.

Remember, beyond Greece the entire postwar project of European unification is at risk. Maybe Germany doesn't like that so much either.

See my earlier entry, "Germany's Power Polarizes Europe."

Greece Prime Minister Alexis Tsipras Speaks to European Parliament

At Telegraph UK, "Tspiras demands that Greece 'be given a way out of debt crisis' as Greek PM torn apart by EU":

The Greek PM is up.

He says he has now been given a mandate from his people to "redouble our effforts to get a socially just and economically sustainable solution to the Greek problem without repeating the mistakes of the past, which condemend the Greek economy."

He his government came to power five a half months ago and "I fully assume this responsibility for what has happened in the course of these give and a half months. But if we are being sincere, we must recognise that the basic responsibility for the impasse of the Greek economy...don't just concern the past five and a half months, but five and a half years."

*****

Mr Tsipras says the majority of the Greek people "have no other choice but to "demand that they be given a way out."

"We demand an agreement with our neighbours but one that gives us a sign that we are exiting from the crisis and there is light at the end of the tunnel. An agreement which will bring about credible and neccessary reforms."

Reforms have been more "than ordinary citizens can stand."

*****

Debt relief is not a means to take money off European taxpayers, says Mr Tsipras.

He says the bail-out money never trickled down to the Greek people, but to save European banks. That generates a round of applause from MEP's.

*****

Europe is at "a crucial juncture". Mr Tsipras says his country's crisis is just a manifestation of Europe's inability to solve its debt crisis.

"What we now need is a European solution to a European problem."

And with that, Mr Tsipras's address ends.

*****

Marine Le Pen speaks.

Some odd bed fellows for the Leftist Mr Tsipras. France's Marine Le Pen is next to deliver a rousing defence of his country against euro diktats.

Like Mr Farage, she is advocating an exit from the "steel jaws" of the euro.

Check back for updates.

Readers' Questions on Greece Crisis

Very informative.

At the Financial Times, "Greece debt crisis: Readers’ questions answered."

Five Days to Save Greece From the Abyss Warns Europe

At the Telegraph UK, "'This is the most critical moment in our history' - five days to save Greece from the abyss warn European leaders":

Creditor powers ready plans to deal with humanitarian crisis and a banking collapse in Greece as agreement remains perilously out of reach.

The European Union faces "the most critical" moment in its 64-year history, after leaders warned they had five days to prevent Greece from careering out of the euro and into a full blown humanitarian crisis.

"Our inability to find agreement may lead to the bankruptcy of Greece and the insolvency of its banking system", said Donald Tusk, head of the European Council, after talks between Greece and its partners ended without agreement on Tuesday night...

More at Euronews, "New deadline for Greek debt deal: Eurozone leaders have given Greece until Thursday to present a comprehensive reform package to the Eurogroup finance ministers."

Greece Clings to Hope as Alexis Tsipras Battles Banking Collapse

At the Guardian UK, "Prime minister pleads with sceptical leaders to provide two-pronged financial assistance with Angela Merkel saying it is ‘matter of days’ until time runs out":

Greece continued to cling to hopes of remaining within the eurozone as it pleaded with its sceptical European partners on Tuesday to agree fresh financial assistance that would prevent the collapse of its banks within the next few days.

Alexis Tsipras, the Greek prime minister, submitted proposals for a third bailout to a summit of eurozone leaders in Brussels, making clear that his country would also need immediate support to stop a banking collapse that would force a return to the drachma.

Greece’s new finance minister, Euclid Tsakalotos, prompted optimism of a breakthrough when he said there was “political will” in Brussels to keep the eurozone intact.

Government sources in Greece said Tsipras has proposed a two-pronged approach. The prime minister asked for three to four months of bridging finance that would keep the banks open and allow Athens to pay their pressing debts to the European Central Bank and the International Monetary Fund. That would be followed by a third bailout package lasting two years, which would include debt relief.

Despite his favoured no vote winning Sunday’s referendum by a large majority, Tsipras is aware that both emergency finance and a longer-term deal under the European Stability Mechanism (ESM) would come with significant strings attached.

In the hope that Washington would lean on Brussels to agree a deal, Tsipras spoke to Barack Obama before the summit. The US president then spoke to Angela Merkel, putting pressure on the German chancellor to keep Greece in the eurozone. The White House is keen to avoid Greece leaving the euro, fearful that it could increase Russia’s influence in the eastern Mediterranean.

Brussels has made it clear that Greece’s fate will be decided quickly. Refusal by eurozone leaders – many of whom have lost patience with Tsipras – would lead to Greece’s departure from the single currency being confirmed at the impending summit of all 28 European Union countries, which has been tentatively planned for Sunday...

Keep reading.

Greece Given 24-Hour Deadline

Never a dull moment over there.

At the Guardian UK, "Eurozone struggles to find joint response to Greek referendum":

GUARDIAN: Greece given 24 hour deadline #tomorrowspaperstoday #BBCPapers pic.twitter.com/xpENuhvFnL

— Neil Henderson (@hendopolis) July 6, 2015

Heads of governments at odds as Germany and European commission let Greece stew while France, Italy and Spain are impatient for a deal.

Germany and France scrambled to avoid a major split over Greece on Monday evening as the eurozone delivered a damning verdict on Alexis Tsipras’s landslide referendum victory on Sunday and Angela Merkel demanded that the Greek prime minister put down new proposals to break the deadlock.

As concerns mount that Greek banks will run out of cash, and about the damage being inflicted on the country’s economy, hopes for a breakthrough faded. EU leaders voiced despair and descended into recrimination over how to respond to Sunday’s overwhelming rejection of eurozone austerity terms as the price for keeping Greece in the currency.

Tsipras, meanwhile, moved to insure himself against purported eurozone plots to topple him and force regime change by engineering a national consensus of the country’s five mainstream parties behind his negotiating strategy, focused on securing debt relief. Tsipras also sacrificed his controversial finance minister Yanis Varoufakis, in what was seen as a conciliatory signal towards Greece’s creditors.

In Paris, Chancellor Angela Merkel and President François Hollande tried to plot a common strategy after Greeks returned a resounding no to five years of eurozone-scripted austerity. The two leaders were trying to find a joint approach to the growing crisis ahead of an emergency eurozone summit on Tuesday to deal with the fallout.

But Merkel said there was no current basis for negotiating with the Greek side and called on Tsipras to make the next move.

As eurozone leaders prepared for today’s emergency summit in Brussels, the heads of government were at odds. France, Italy and Spain are impatient for a deal while Germany, the European commission and northern Europe seem content to let Greece stew and allow the euphoria following Sunday’s vote to give way to the sobering realities of bank closures, cash shortages and isolation.

Greek banks are to remain closed until Thursday at the earliest, it was announced, with ATM withdrawals rationed to €60 daily.

“The prospects of a happy resolution of this crisis are rapidly diminishing,” said the British chancellor, George Osborne, after speaking to some of the key policymakers. “If there is no signal from these meetings that Greece and the eurozone are ready to get around the table again, we can expect the financial situation in Greece to deteriorate rapidly.”

The commission had nothing positive at all to say about Sunday’s Greek referendum, while Germany’s increasingly hardline social democratic leader, Sigmar Gabriel, warned that Greece was on the brink of insolvency.

He accused Tsipras, the radical leftist prime minister who outmanoeuvred the rest of the eurozone with his plebiscite, of ruthlessly pursuing the Greek national interest at everyone else’s expense. His message suggested a Grexit was now inevitable as he stressed the need for EU humanitarian programmes to forestall social implosion in Greece.

Utterly amazing.

Still more.

Germany's Power Polarizes Europe

Yeah, which explains all the Angela Merkel Hitler paraphernalia.

At the Wall Street Journal, "The Continent’s most powerful country is grappling with its leadership role—and other nations are, too":

BERLIN—Under the glass Reichstag dome in Germany’s parliament last week, left-wing opposition leader Gregor Gysi lit into Chancellor Angela Merkel for saddling Greece with a staggering unemployment rate, devastating wage cuts, and “soup kitchens upon soup kitchens.”

The chancellor, sitting a few steps away with a blank expression on her face, scrolled through her smartphone.

Ms. Merkel’s power after a decade in office has become seemingly untouchable, both within Germany and across Europe. But with the “no” vote in Sunday’s Greek referendum on bailout terms posing the biggest challenge yet to decades of European integration, risks to the European project resulting from Germany’s rise as the Continent’s most powerful country are becoming clear.

On Friday, Spanish antiausterity leader Pablo Iglesias urged his countrymen: “We don’t want to be a German colony.” On Sunday, after Greece’s result became clear, Italian populist Beppe Grillo said, “Now Merkel and bankers will have food for thought.” On Monday, Ms. Merkel flew to Paris for crisis talks amid signs the French government was resisting Berlin’s hard line on Greece.

“What is happening now is a defeat for Germany, especially, far more than for any other country,” said Marcel Fratzscher, head of the German Institute for Economic Research, a leading Berlin think tank. “Germany has, at the end of the day, helped determine most of the European decisions of the last five years.”

Senior German officials, in private moments, marvel at the fact that their country, despite its weak military and inward-looking public, now has a greater impact on most European policy debates than Britain or France, and appears to wield more global influence that at any other time since World War II.

Berlin think-tank elites, diplomats and mainstream politicians generally see the rise of German power as a good thing. They describe the stability, patience and rules-based discipline of today’s German governance as what Europe needs in these turbulent times. Germany—with its export-dependent economy and history-stained national identity—has the most to lose from an unraveling of European integration and is focused on keeping the union strong, they say.

Ms. Merkel’s popularity at home has remained strong through the Greek crisis, holding about steady at 67% in a poll at the end of June. She now must weigh whether to offer additional carrots to Greece to keep the country in the euro and preserve the irreversibility of membership in the common currency—at the risk of political backlash at home and the ire of German fiscal hawks. Only 10% of Germans supported further concessions for Greece in another poll last week.

U.S. officials generally see German leadership as crucial geopolitically, praising Ms. Merkel’s push last year to get all 28 European Union countries to adopt sanctions against Russia over Ukraine. But across Europe, Germany’s power is also straining unity in the EU, an alliance forged as a partnership of equals that now is struggling to accommodate the swelling dominance of one member.

With every crisis in which Ms. Merkel acts as the Continent’s go-to problem solver, the message to many other Europeans is that for all the lip service about the common “European project,” it is the Germans and faceless bureaucrats in Brussels who run the show...

Power is the ultima ratio.

Still more.

Holly Williams Reports: Anxiety in Greece After 'No' Vote

More excellent coverage from Holly Williams in Athens, for CBS News, "Celebrations, anxiety after "no" vote in Greece."

Euclid Tsakalótos Takes Over as New Greece Finance Minister

At Zero Hedge, "Meet New Greek Finance Minister Euclid Tsakalotos."

Whatever Tsakalótos' ideas may be, he is a straightforward politician. I expect he won't be using tricks or try to manipulate the media.

— Yannis Koutsomitis (@YanniKouts) July 6, 2015

On assuming duties, new Greek FinMin @tsakalotos says: The message of Sunday, the 61%, is something that will remain in economic history.

— NikiKitsantonis (@NikiKitsantonis) July 6, 2015

Greek FinMin @tsakalotos I won't hide the fact that I'm nervous and anxious. I understand that I'm assuming my post at a difficult time.

— NikiKitsantonis (@NikiKitsantonis) July 6, 2015

Greek FinMin @tsakalotos says whole world talking about need for a viable solution to Greek crisis thanks to efforts of @yanisvaroufakis

— NikiKitsantonis (@NikiKitsantonis) July 6, 2015

Varoufakis hands over to Tsakalotos at the Finance Ministry. It's not quite all smiles #Greece #euro pic.twitter.com/dIKr6p11xM

— Nick Malkoutzis (@NickMalkoutzis) July 6, 2015

Germany Sticks to Hard Line After Greece 'No' Vote

At the New York Times, "Germany Maintains a Hard Line on Greece Debt After Vote":

ATHENS — Germany maintained a hard line with Athens on Monday after Greek voters rejected Europe’s austerity policies in a referendum, intensifying pressure on Prime Minister Alexis Tsipras to restart bailout talks and opening a rift with European countries that appeared more inclined now to consider softening the push for austerity.

As Mr. Tsipras changed his finance minister Monday and laid plans to restart bailout negotiations with creditors, however, it appeared the jubilation that followed the no vote in Greece could fade quickly as signs of financial collapse become more evident.

While the referendum may have lifted Mr. Tsipras’s popularity and bought some time to return to negotiations, Greek banks are almost out of cash and are expected to stay closed for at least several more days, analysts and people close to the situation in Greece said.

The government decided on Monday that a bank holiday scheduled to end Tuesday would now be extended through Wednesday, and a daily cap on A.T.M. withdrawals of 60 euros, about $66, in place since last week, could be tightened. An announcement was expected later in the day. Long lines formed again at cash machines in Athens on Monday as people continued to take out money in dribs and drabs.

The European Central Bank decided Monday to maintain emergency loans to Greek banks at about 89 billion euros, a level that keeps them from failing but will not prevent them from running out of cash they can issue to depositors within a few days.

Ominously, the central bank also said it would tighten requirements for collateral that Greek banks must post in return for loans. The decision means that, even if the European Central Bank decides to increase the lending limit, Greek banks might not have enough collateral needed to qualify for more emergency cash...

Continue reading.

So You Think Greece Can't Happen Here?

Think again.

From Michael Tanner, at the New York Post, "Think Greece can’t happen here? You’re wrong":

Most Americans look at the rerun of the Greek euro crisis with something between smug amusement and condescending disapproval. When will those profligate Greeks get their economic house in order and stop looking to others to bail them out?
But, should people living in glass economic houses really throw stones?

After all, just like Greece, the United States government has been living beyond its means, running up an enormous debt that will eventually need to be repaid.

True, our budget deficit this year will be lower than it has been, just $486 billion compared to $1.4 trillion as recently as 2009. But this is just a temporary respite. Within the next couple of years the deficit will start to rise again. By 2025, we will again face trillion-dollar shortfalls.

And even a $486 billion deficit adds to our ever growing debt. Our national debt currently approaches $18.2 trillion, roughly 101% of GDP. That’s right. We owe more than the value of all the goods and services produced in this country every year. It is as if your credit-card bills exceeded your entire pay check.

That’s not quite as bad as Greece, of course, whose debt exceeds 177% of their GDP. But it is worse than countries like France or Spain.

And give us time! Like Greece, the driving force behind our debt is the growing cost of entitlement programs for health care and retirement. If one includes future unfunded liabilities for Social Security and Medicare, our real debt exceeds $90 trillion.

That’s more than five times our GDP. Greece is still in worse shape — their unfunded liabilities top 875% of GDP — but we’re gaining.

At the heart of Greece’s problems lies a government grown too big, too intrusive, and too expensive. The Greek government spent nearly half of the country’s GDP last year (49.3%), and that actually represents a decline from the 51.8% it averaged since 2006. The Greek’s may complain about austerity, but they’ve hardly practiced it.

Our government is far smaller than Greece’s today. Federal spending is just 20.5% of GDP. But, according to the Congressional Budget Office’s alternative fiscal scenario, that could rise to almost 34% by mid-century. Factoring in state and local government spending, which already accounts for roughly 14.4% of GDP, total government expenditure in the US could reach 48% to 50% in 2050, roughly Greek levels...

When America goes belly up, there'll be no one out there to bail us out. We're the top dog in the world economy, and likely will be for a long time. Frankly, our growing list of enemies around the world will be cheering America's collapse.

But continue reading.

Live Updates on Greece Referendum

The polls have closed, but Telegraph UK expects to update, here: "Greek Referendum Day results live: Voting set to close as banks teeter on the brink."



Also at the Guardian UK, "Greek referendum: Varoufakis says deal can be reached in 24hrs if vote is a 'No' – live," and WSJ, "Greek Referendum — Live."

I'll have updates throughout the day.

Angela Merkel's Leadership Has Failed in the Greece Crisis

At Der Spiegel, "Angela's Ashes: How Merkel Failed Greece and Europe":

Angela Merkel relishes her reputation as queen of Europe. But she hasn't learned how to use her power, instead allowing a bad situation to heat up to the boiling point. Her inability to take unpopular stances badly exacerbated the Greek crisis.

Angela Merkel was already leaving for the weekend when she received the call that would change everything. The chancellor had just had a grueling day, spending all of it in meetings with Greek Prime Minister Alexis Tsipras -- sometimes as part of a larger group, and others with only him and French President François Hollande.

They discussed debt restructuring and billions of euros in additional investments. When it comes to issues important to him, Tsipras can be exhaustingly stubborn. In the end, though, Merkel was left with the feeling the EU summit was the milestone that could quite possibly mark a turn for the better.

Martin Schulz, president of the European Parliament, had pulled Merkel aside in Brussels and whispered to her that Tsipras was seeking allies in the opposition, with whom he could push a reform program through Greek parliament even without the consent of the radical wing of Syriza, if necessary. "Can you help me?" Tsipras had asked Schulz. Schulz has good connections in the Social Democratic PASOK Party.

But when Merkel returned to Berlin, she received a call from Tsipras. He told her that he was not interested in a deal, but that he intended to hold a referendum in Greece first. A short time later, he tweeted: "With a clear 'NO,' we send a message that Greece is not going to surrender."

Merkel is known for not being easily fazed. She has made it this far in part because she has firm control of her emotions. And she remained silent throughout the weekend. But at a Monday meeting of leading members of her Christian Democratic Union (CDU), she hinted at the depth of her disappointment in Tsipras. His policies are "hard and ideological," she said, adding that he is steering his country into a brick wall "with his eyes wide open."

Merkel had always described Tsipras as a man who, while leading a crazy organization, was quite open and accommodating in person. She had hoped that Tsipras would ultimately help reason prevail. Now, though, it appears that he has handed Merkel the greatest debacle of her tenure as chancellor.

'Nothing Left to Fear'

In the end, of course, it will primarily be the fault of the radical Greek government if the country is ejected from the euro zone. How should one deal with a prime minister who conducts negotiations using the language of military mobilization? "We have justice on our side. If we can overcome fear, then there is nothing left to fear," Tsipras tweeted on Monday.

But the divide that is now opening up in Europe also has something to do with Merkel's leadership style -- and with her idiosyncrasy of allowing things to drift for extended periods. This method works when it comes to negotiating a compromise, and when everyone involved is interested in a favorable outcome. But it reaches its limits when someone like Tsipras is determined to carry things to the extreme.

It has long been clear that Greece is a special case in the context of the euro crisis. It is a country in which neither the taxation system nor the land registry system works, a country that is so deeply in debt that no reasonable economist still believes that it can ever repay what it owes. In addition, parties that habitually plundered the state ran the country for years. Then came Syriza, a movement that, at least in its radical quarters, dreamed of toppling the system.

Merkel knew all of this. Nevertheless, she tried to fix the problem with recipes she had used in German domestic politics: delaying, hiding and allowing things to remain vague. There was no lack of cautionary voices. Finance Minister Wolfgang Schäuble has long argued that Greece should be taken on an orderly path out of the euro.

Merkel hopes that the Greeks will vote against Tsipras and in favor of their creditors' austerity proposals on Sunday. If that happens, the Greek prime minister will hardly be able to remain in office. But even so, Greece will remain a bankrupt country and would be faced with forming a new government in the midst of chaos...

Well, she refused further negotiations until after the referendum, which pretty much helped turn the tide of public opinion against the no vote. But we'll see. We'll see.

Voting Begins in Greece Referendum

At the Guardian UK, "Greeks begin voting in referendum as the euro faces its biggest challenge":

Almost 9.9 million Greeks have the right to vote in Sunday’s plebiscite on whether the country should accept the terms of its creditors.

Greeks began voting in a referendum on Sunday that presents the biggest challenge to the running of the euro since its adoption and risks sending shock waves through the world’s financial markets.

The nationwide ballot was taking place at the end of a week of unending drama that saw Greece close its banks, ration cash, fail to repay the IMF and lose billions of euros when its bailout programme expired. The vote is on the last terms offered to Greece before its prime minister, Alexis Tsipras, abandoned talks with his country’s lenders last weekend, saying their conditions would only exacerbate the plight of a country whose economy has already shrunk by a quarter.

At a rally in the centre of Athens on Friday night, Tsipras urged his compatriots to cast a no ballot, assuring them it would not be a vote for leaving the euro, but for remaining in Europe “with dignity”. Greece’s creditors and most of the opposition parties have claimed that, on the contrary, it could lead to exit from the single market (“Grexit”) and even the European Union.

Almost 9.9 million Greeks have the right to vote in the referendum, which the interior ministry said would cost less than half the amount spent on the general election in January that brought Tsipras’s Syriza party into office in a coalition with the populist, nationalist Anel party.

Among the many imponderables was the impact of votes cast by Greeks living abroad. Under the same rules that govern elections, expatriates must return to the country if they are to cast valid ballots. There was evidence that large numbers of Greeks living abroad were coming back for the referendum and that most leaned towards voting yes...

Keep reading.

Greek Crisis: EU Warns of Armageddon If Voters Reject Terms

It's close, but my hunch is a yes vote.

But see the Telegraph UK:

"Without new money, salaries won't be paid, the health system will stop functioning, the power network and public transport will break down," warns President of European Parliament.

Greece risks a collapse of the medical system, power black-outs, and an import blockade, if the Greek people reject creditor demands in a make-or-break referendum tomorrow, the EU's highest elected official has warned.

Martin Schulz, the president of the European Parliament, said the EU authorities may have to prepare emergency loans to keep basic public services functioning and to prevent the debt-stricken country spinning out of control next week.

"Without new money, salaries won't be paid, the health system will stop functioning, the power network and public transport will break down, and they won't be able to import vital goods because nobody can pay," he said.

Mr Schulz earlier called for the elected Syriza government to be replaced by "technocrat" rule until stability is restored.

The alarmist warnings are part of an escalating pressure campaign by European leaders as Greeks decide their destiny in what has become – despite attempts by Syriza to present it otherwise - an in-out vote on euro membership after five years of economic depression and mass unemployment.

Yanis Varoufakis, the Greek finance minister, said his country is on "war-footing" and accused the eurozone of trying to terrify Greek voters into submission...

It's fear-mongering, but he has a point.

Greece Deeply Divided on Eve of Referendum

It's gonna be a yes vote. People just can't hang around with no money and nothing to eat.

And recall the prime minister's not well liked at all. Freakin' communist, heh.

At WSJ, "On Bailout Referendum’s Eve, Greeks Are Deeply Divided on Which Course to Take":

ATHENS—At a cafe in an upscale district here, Dimitris Manikis, an anesthesiologist, was downbeat.

“I think ‘yes’ is going to win,” Dr. Manikis said. “Greeks are passive.” It was Saturday evening, the sun still bright in a blue sky. He said would vote “no” tomorrow in a referendum of extraordinary consequence, which will ask Greeks if they agree to a rescue deal with European creditors but may well decide the country’s future in the eurozone.

A few tables away, Alexis Tsirigakis, an interior designer who supports the ‘yes’ camp, was also pessimistic. “Tsipras will win,” he said, referring to Alexis Tsipras, the country’s leftist prime minister, who called the referendum and has vigorously urged a “no” vote. “I don’t know what, but he will win.”

Polls have the two sides evenly balanced. There are no public data that break down the demographics and the inclinations of “yes” and “no,” but conversations around this city depict a populace that is split in two: Haves and have-nots, young and old, those bitten by austerity and those less exposed, those with money in the closed banks and those without.

Whichever side wins and whoever is leading Greece next week, next month or next year, the gulf will be hard to close. Dr. Manikis said he would be happy to see Greece leave the eurozone. He came to this view in 2010, after the first round of austerity hit the country. He works in a public hospital and he saw the suicides and the suicide attempts come in. “It is not just numbers, statistics,” he said. “I have seen this.”

He said a “no” vote was Greece’s best chance to push back against austerity—a position adopted by Mr. Tsipras but roundly dismissed by his European counterparts. “The stronger the ‘no’ is, the better the possibilities for further negotiation,” Dr. Manikis said.

Mr. Tsirigakis said Greece must stay in the euro. “We have to pay,” he said. “Whatever the cost is, it is better to pay than to wake up tomorrow like Macedonia and Albania.”

He said a “no” vote would mean banks would stay closed, deposits would be lost and pensions vaporized. “I think people don’t understand,” he said. “Let’s see how they reopen the banks. How? How?”

A worker at the cafe, Harris Bouros, said he thought the country was split 50-50. He said he planned to vote “yes.” “No is like jumping from a cliff,” he said. “With ‘yes’ there is some hope.”

One apparent gulf in attitude comes with age. Retirees, who are owed pensions, have a big stake in the solvency of the state. The young have less invested in the system, and less money trapped in the banks.

Across the city center in the neighborhood of Koukaki, young Greeks gathered at a bar built in the shell of an old auto-mechanic’s shop. At an outside table were three 26-year-olds. All said they would vote “no.” The debt crisis has run more than five years, a substantial portion of their adult lives...

Whoa! Greece Consumers Withdraw €1 Billion in Banking Run as ECB Pledges New Funds to Stave Off Grexit

This is amazing.

At the Telegraph UK, "Greek debt crisis endgame: ECB agrees to pump more money into Greece's banks as Russia enters the ring."

Plus, "European authorities forced to stave off Greek banking collapse as capital controls loom":

ECB increases tap on emergency funding as prospect of capital controls and bank closures beckon before Monday's emergency summit.

Greece's banking system was saved from a weekend collapse after the European Central Bank was forced to pump emergency rescue funds and halt the immediate threat of capital controls.

The ECB took the unusual move to raise its emergency liquidity assistance (ELA) twice in the space of three days as a further €1.2bn fled the financial system on Friday. The ceiling on ELA was reportedly raised by €1.8bn according to reports, and came following a request from the Bank of Greece.

The Frankfurt-based central bank took the drastic action after its officials warned European finance ministers that Greece's banks may not be open for business on Monday. Total deposit flight has now soared to €4.2bn this week as full-blown panic over the country's eurozone future has set in.

ELA funding is one of the last critical links keeping Greece in the single currency.

Without the funds, Greece would likely find itself in the midst of a bank run, forcing the Leftist government to impose draconian capital controls to prop up the banking system. Such measures, which include deposit withdrawal limits, were last seen in the eurozone in 2013 in Cyprus after the ECB had threatened to cut the life support for Nicosia's financial system.

The drip feed of cash will now be reviewed by the ECB's governing council on Monday, when EU leaders and finance ministers will convene for a last ditch attempt to thrash out their differences with Athens.

Donald Tusk, the man chairing summit, confirmed that Athens would be delivered an ultimatum deal as the country's future reached a "critical" point.

"We are close to the point where the Greek government will have to choose to accept what I believe is a good offer for support, or to head towards default," said Mr Tusk.

"The game of chicken needs to end, and so does the blame game. There is no time for more games."

He added the meeting would not produce a final resolution to the country's five-month negotiating impasse, with any ultimate decision remaining with the eurozone's finance ministers.

"There is time, but only a few days. Let us use them wisely," said Mr Tusk...

More.

I still don't believe that European leaders will allow Greece to exit the EMU. It'd be the beginning of the end of the modern European Union, setting a precedent in other states, especially the PIIGS nations --- Portugal, Ireland, Italy, Greece, and Spain --- and create centrifugal pressures on the system.

It's going to be an interesting week next week.

Prime Minister Alexis Tsipras Attacks IMF's 'Criminal Responsibility' for Greece Economic Crisis

What a soap opera, sheesh.

At the Telegraph UK, "Alexis Tsipras launches scathing attack on IMF as Greek authorities vow to fight desperate state cash grab":

Greek premier says IMF bears “criminal responsibility” as authorities vow only to transfer reserves if its the "last drop of blood" that will save the country from a euro exit.

Greek prime minister Alexis Tsipras escalated his defiance towards the country’s official creditors, with a pointed attack on the International Monetary Fund, accusing the institution of “financial asphyxiation”.

In a firebrand speech to his parliament, Mr Tsipras said the IMF bore "criminal responsibility" for his country’s cash crisis.
"The fixation on cuts...is most likely part of a political plan...to humiliate an entire people that has suffered in the past five years through no fault of its own,” said Mr Tsipras.

This is the first time the Greek premier has targeted his government’s ire at the Fund in such a public manner. The IMF, which holds the position of senior creditor in the country's €240m rescue, is demanding Syriza cross its sacred red line on pensions, which they calculate as amounting to 16.2pc of GDP.

The combative speech came after the prime minister had met with his parliamentarians and leader of opposition centrist To Potami party. According to reports, Mr Tsipras told his counterparts the country would not fulfil its latest IMF repayment on June 30 if no deal was reached.

His defiant address further exposes the rift between Greece’s troika of lenders, whose competing demands on the country have led to a five-month negotiating stalemate.

“Our biggest battles [with creditors] still lie ahead and we must be ready to fight,” added Mr Tsipras.

IMF chief economist Olivier Blanchard has admitted the debtor country will need a further write-off on its mounting debt pile - a measure which has all but been ruled out by Greece’s European paymasters...

More.