Greece Moves Closer To Default; Greek PM Tsipras Calls For Referendum Vote On Bailout

aamGreece moved one step closer to defaulting on their looming debts after Greek Prime Minister Alexis Tsipras issued a surprising call for a snap referendum vote on proposed reforms that Greece’s creditors made on Thursday for the cash strapped country to receive a new financial bailout that allows Athens to receive its final payment on its €240 billion bailout package.

Tonight at midnight Greece’s parliament is debating and will vote on Tsipras’ decision to seek a new referendum vote that would occur on July 5th.

Earlier today, Euro group finance ministers decided to not extend Greece’s temporary bailout extension beyond June 30th, sending a stark message to Greeks after their newly elected leftist government have dragged its feet over the past 5 months in negotiations and refused to follow through with the necessary austerity reforms that its creditors requested.

Euro group President Jeroen Dijsselbloem said today that Greece has “closed the door” on future talks.

German Finance Minister Wolfgang Schauble gave his own press conference today and made it clear that Greece is likely to get into a “difficult situation” in the days ahead.

“This is not a good day for Europe. But Europe usually became stronger during crises” Schauble said.

“We will do everything to fight any possible contagion” Schauble explained.

Currently, there is no Plan B in focus that concretely addresses what happens once Greece goes into arrears on July 1st and defaults on its €1.6 billion loan to the IMF.

It won’t be known until Sunday night or Monday whether the ECB will extend more liquidity to Greece’s dependent and vulnerable banks.

Capital controls could likely be the next step imposed on Greece’s banks.

Carsten Brzeski, chief economist at ING-DiBa recently tweeted:

I didn’t spell it out earlier, but the reference to Greece taking ‘measures to ensure financial stability’ is a pretty clear hint that capital controls will be needed.

Eurogroup statement with nicely hidden hint to to start capital controls.

Here is the Euro Group ministry statement:

We stress that the expiry of the EFSF financial arrangement with Greece, without immediate prospects of a follow-up arrangement, will require measures by the Greek authorities, with the technical assistance of the institutions, to safeguard the stability of the Greek financial system.

The Eurogroup will monitor very closely the economic and financial situation in Greece and the Eurogroup stands ready to reconvene to take appropriate decisions where needed, in the interest of Greece as euro area member

Johnathan Schweitzer                     schweitz31@gmail.com

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