What’s next in the Greek saga?
Greece is at the last chance saloon. A resounding No vote in a referendum Sunday on the tough conditions attached to more loans leaves Athens at odds with its main creditors — the other eurozone governments, led by Germany. “Greece is in limbo and is sliding fast toward Grexit,” said Berenberg Bank economist Holger Schmieding, using the shorthand for Greek exit from the euro. So what’s next?
Q What happens now? A The politicians will try to re-start bailout talks — but it won’t be easy. On Monday, Greek Prime Minister Alexis Tsipras was given hours to come up with a plan to keep his country in the euro and stave off economic disaster. German Chancellor Angela Merkel said “time is running out,” as she and French President François Hollande responded to Sunday’s referendum. Euro-region finance ministers gather for an emergency meeting Tuesday and their position “will depend on Greek proposals,” Hollande said. Q Will Greece just capitulate? A In the face of the referendum result, that would be difficult. However, Greece made a pre-emptive concession to creditors with the resignation of outspoken Finance Minister Yanis Varoufakis, who had clashed repeatedly with his counterparts from other countries. But in a blog post more akin to a war cry, Varoufakis, a 54-year-old Greek-Australian economist, said he would wear “the creditors’ loathing with pride.”
Q What happens while we wait for talks to get started again?
A The most pressing question is the country’s banks, which closed a week ago after the European Central Bank refused to let them tap more emergency credit. Banks needed the credit to replace deposits as Greeks pulled their savings out, fearing the money would be lost in a bank collapse or changed into a new currency that is worth less. Automated teller machine withdrawals are limited to 60 euros ($84) a day to keep banks from collapsing. Suppliers are demanding businesses pay cash up front, making normal commerce impossible.
Q Could Greece run out of money?
A Yes. In a move sure to increase pressure on Greece’s flailing banks, the European Central Bank Monday decided not to expand an emergency assistance program, raising fears Greece could soon go completely bankrupt. The ECB left unspecified the timing of an extension of its $120-billion credit line. A senior Greek banking official said after the announcement that Greek banks had been provided with enough money to last until Wednesday evening. “It’s putting pressure on all sides,” an ECB official said. “We go day by day until a resolution is found.” Q Just how bad are things? A German Deputy Chancellor Sigmar Gabriel said in Berlin European leaders needed to prepare humanitarian aid of food and medicine for Greece, a dire warning about how close the Mediterranean nation is to full-blown shortages.