Showdown on Grexit as Parliament Approves July 5 Referendum

Late breaking update: Greek Prime Minister Alexis Tsipras went on national television on Sunday night and announced that banks and stock markets in Greece would be closed on Monday, and other capital control measures would also be imposed immediately. According to the Guardian, the Greek Finance Minister has already extended the bank and market shutdown until July 7, following the results of the referendum. In response to the Greek parliament’s vote to hold a referendum on July 5, the European Commission issued the text of its latest offer to Greece, in an effort to woo voters to support the deal. Tsipras, in his TV address, labeled the decision by the European Central Bank to limit the emergency funds to Greek banks as “blackmail.”  In another sign of the global panic over the European crisis, President Obama called German Chancellor Merkel on Sunday, to urge EU officials to do everything possible to keep Greece in the EMU.

The Greek parliament Sunday morning voted to hold a referendum on Sunday, July 5, on the Troika’s austerity package. Prime Minister Alexis Tsipras stunned the EU and IMF on Saturday, when he announced his intent to get parliamentary approval for a referendum, which calls the bluff on the Troika’s clear intention of using the so-called debt negotiations to bring down the Syriza government, and install yet another in a long line of corrupt, submissive Greek governments, that would comply with the murderous austerity and illegitimate debt repayment— with the delusionary goal of extending the life of the thoroughly bankrupt Euro system.

In an emergency meeting on Sunday, the European Central Bank announced that it would continue to provide funds from the Emergency Liquidity Assistance (ELA) fund to the Greek banks. However, with runs on the Greek banks over the weekend through ATM withdrawals, there was growing concern that the Greek government might have to announce a bank holiday on Monday or some time later in the week, prior to the July 5 referendum.

On Saturday, European finance ministers had rejected Greece’s proposal for a weeklong extension of the June 30 deadline for a new bailout deal. On June 30, Greece is due to make a 1.5 billion Euro payment to the IMF, which it can only pay if the balance of the 8 billion Euro Troika bailout fund is released.  Even if that payment to the IMF is made, there is no way Greece can make payments to the ECB and EU that are due early in the summer.

In response to the weekend developments, German Finance Minister Wolfgang Schäuble told ZDF TV that he no longer saw any prospect for avoiding a Greek default on Tuesday and an exit from the Euro.  He added that he thought the situation would reach a break point even before the Tuesday deadline for the payment to the IMF—meaning a break point on Monday.

Schäuble’s views were contradicted by French Prime Minister Manuel Valls, who told French TV on Sunday, “I cannot resign myself to Greece leaving the euro zone—we must find a solution.”  He made a plea for Greece to return to the negotiating table.

At the bottom of the split is the looming blowout of the entire European and trans-Atlantic financial system, which is hopelessly bankrupt, and could detonate in the event of a Greek default.  A Greek government Truth Commission issued its findings last week, and concluded that none of the remaining Greek debt is legitimate, and none should be paid.  The injection of ELA funds into the Greek banks, to offset capital flight over the past weeks, has created yet a further nominal debt for Greece, since the ELA loans to the Greek banks are to be paid back at higher interest rates than the Greek government could have gotten from the ECB.  The bankers’ swindle never ends.