Door closing to Greece as euro finance chiefs scorn referendum

Euro-area finance chiefs poured scorn on the Greek government’s decision to call a referendum on the terms of the country’s bailout and said the door was closing to any further discussion on resolving a standoff over aid.

Finance chiefs from 18 euro nations said they would grill their Greek counterpart, Yanis Varoufakis, on what his government proposed after the sudden announcement of a referendum upended their work on the way forward for Greece. They are meeting in Brussels on Saturday hours after Prime Minister Alexis Tsipras called a July 5 ballot on whether Greece should accept the demands of the country’s creditors.

“It’s a very sad decision for Greece because it’s closed the door to further talks, a door that was still open in my mind,” Jeroen Dijsselbloem, the Dutch finance minister who chairs the meetings, told reporters as he arrived. “We will hear from the Greek minister today and then decide on the future consequences.”

Ministers who had thought the fifth so-called Eurogroup meeting in little more than a week would hammer out the final pieces of a deal on aid must now take stock of one of the most dramatic moves yet in a debt crisis that began more than five years ago. The referendum throws into doubt future financing for Greece after its current bailout ends on Tuesday.

Plan B

German Finance Minister Wolfgang Schaeuble said the Greek government appeared to have “unilaterally” pulled out of any further negotiation with its plan to a ballot on a common proposal put forward by creditors.

“We no longer have a basis for negotiation,” he told reporters as he arrived for the meeting.

The talks will focus on questions of the creditors’ bailout offer, whether to extend the bailout and contingency plans in the event of a breakdown, a euro-area official said. The meeting is predicted to be a long one, the official said, asking not to be named because the talks.

“Plan B is fast unravelling and becoming Plan A,” said Alexander Stubb of Finland. There’s a “clear consensus” among ministers that a bailout extension is “out of the question.” Ministers are facing “potentially a very sad day,” he said.

The outcome of the talks in Brussels will help determine a series of events over the coming hours before markets — and Greek banks — open on Monday morning. With evidence that some ATMs in suburbs of Athens had run out of cash Saturday, Greek lawmakers began to debate the government’s referendum plan, including the proposed question to be put to the people.

‘Common decency’

The turn of events was sparked after midnight in Athens, when Tsipras returned from weeklong negotiations in Brussels and announced the referendum. In a nationally televised address, he excoriated a take-it-or-leave it offer as a violation of European Union rules and “common decency.”

The snap plebiscite was announced five months after Tsipras was swept into office on a wave of discontent about budget cuts that deepened a six-year recession. Some members of his Syriza party advocate defaulting rather than backing down from their anti-austerity policies and Greek ministers, including the defense chief, urged the country of 11 million people to vote “no.”

Greece ‘ultimatum’

“Our partners unfortunately resorted to a proposal- ultimatum to the Greek people,” Tsipras said. “I call on the Greek people to rule on the blackmailing ultimatum asking us to accept a strict and humiliating austerity without end and without prospect.”

Belgian Finance Minister Johan Van Overtveldt expressed bemusement at the referendum. “I find it quite it quite a bizarre move to ask the people what they think of something and say at the same time the government is opposed to it,” said

A “no” vote could ultimately draw the curtain on Greece’s membership of the euro. Faced by a rejection of its demands and those of other creditors, the European Central Bank could feel obliged to cut off the emergency funds that the country’s banks rely on for survival. On the other hand, a ‘yes’ vote would spell defeat for Tsipras and may force him into early elections.

“It looks as if we will have capital controls as of Monday,” Guntram Wolff, director of the Brussels-based Bruegel group, said in an e-mail. “The ECB will unlikely continue to provide ELA and capital controls therefore become imperative.” [Bloomberg]