Greece Moves To Center Stage At Euro Area Summit Amid Concerns Over Grexit

Preparations for EU Summit in BrusselsGreek Prime Minister Alexis Tsipras and newly sworn in Greek Finance Minister Euclid Tsakalotos will be meeting later this afternoon in Brussels for an emergency euro area summit meeting to discuss Greece’s latest bailout proposal, only two days after Greek voters overwhelmingly voted in a referendum vote to reject the last offer from their creditors that contained austerity measures of pension cuts and tax increases.

After removing controversial leftist Greek Finance Minister Varoufakis early on Monday due to his inflammatory antics that proved to be a distraction for negotiators, Greek Prime Minister Tsipras now has an Oxford trained finance minister by his side for today’s summit meeting and could use the outcome of Sunday’s referendum as a mandate for demanding that Greece’s creditors make new concessions that loosens some of the austerity measures that are contained in the creditors’ proposal.

But patience is wearing thin across the other 18 member euro area countries after Greece’s Syriza Party Prime Minister drove Greece literally to the edge of the cliff by playing hard ball with their creditors and over-promising Greeks that a “No” referendum vote means better negotiating power while failing to mention that refusing to accept their creditors’ austerity conditions may also result in a Grexit or expulsion from the 19 member currency union.

It was presumptuous of Greek Prime Minister Tsipras to associate a referendum majority with an automatic victory in negotiations when in truth he holds no crystal ball and can’t accurately conclude that Greece’s creditors will reverse course because of the outcome of  Sunday’s referendum vote.

After five months of failed negotiations over a new 3rd bailout package and defaulting on Greece’s 1.6 billion loan to the IMF that was due on June 30th with another 3.5 billion due later this month to the ECB, Greek Prime Minister Tsipras has his back up against the wall and can ill afford to waste more time by playing chicken with their frustrated creditors who understand that by placating Athens and “watering down” its austerity package, a new precedent will be established in the 19 member euro area currency union that could inspire other anti-austerity movements across Europe to follow suit and adopt the same hard ball tactics of Greece’s leaders in their own countries.

Portugal and Spain have elections later this year and conservative leaders in those countries who supported austerity in the past could become quite alarmed if Greece’s creditors makes special concessions to Greece and loosen the austerity component within Greece’s bailout deal while expecting the other member nations to maintain their own austerity packages.

Today’s emergency summit is not 11th hour negotiations because Greece already defaulted.

It is more like a curtain call that could see Greece take its final bow off the stage for good if Greece’s leaders remain defiant and refuse to accept the austerity package in a future bailout deal.

Yesterday the ECB decided to keep the level of emergency credit for Greece’s  banks unchanged at 89 billion which is barely enough to provide liquidity for Greek banks that are faced with large deposit withdrawals.

Capital controls have already been imposed across Greece last week.

Greeks are only allowed to withdraw 60 per day at ATM’s. Greek banks are closed at least until Thursday.

Greek Newspaper Kathimerini reports that according to sources, Greek PM Tsipras informed his counterparts that his coalition would propose a deal on the most recent set of proposals published by the European Commission.

Kathimerini reports that Athens will also ask for the gradual implementation of “some” measures.

-Johnathan Schweitzer

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