The members of the European Union have issued a clear ultimatum to Greece: present a new proposal for resolving the debt crisis by Thursday (tomorrow), and a response will be determined by a full Emergency European Union Summit on Sunday.
It seems clear that if the Greek bottom line is not acceptable to a consensus of the European Union members by Sunday evening, then Greece will effectively be ejected from the Euro. The exact form of such an exit or ejection could vary.
Reports on the ground in Greece indicate that ATMs are already beginning to run dry and refuse withdrawals. Sources are also suggesting within recent hours that the Greek government is going to order the banks to remain closed.
Likely Greek Position
The new Greek Finance Minister, Euclid Tsakalatos, has formally requested a new three-year bailout from the European Stability Mechanism, in return for a strong commitment to tax and pension reforms on Greece’s part that will begin to be implemented “as early as next week”.
Likely Creditors Position
No write-off of any existing Greek debt. This is led by Germany which is holding an extremely tough and adamant line on this issue.
GREXIT?
It seems clear that the Greek government is effectively begging its creditors for another loan in order to repay its debt liabilities during the next three years, in return for inflicting more pain at home. Greek voters may well wonder for exactly what purpose the Government successfully urged them to vote “NO’ last weekend.
The Greek government may either have miscalculated regarding the seemingly endless willingness of its European Union creditors to keep paying up to preserve the holy cow of European Monetary Union – or, more shockingly, may actually have hoped and expected to lose the referendum last week, in order to obtain a more politically fruitful “exit” for themselves, from the Greek government!
The question that will determine whether Greece begins to exit from the Euro this Sunday, is essentially as follows: is the German government truly desperate to keep Greece in the Euro (for both political reasons and reasons of financial fallout), and will the SYRIZA parliamentarians swallow their pride enough to commit a possible political suicide by agreeing such a dramatic climb down?
Will a Greek Exit be Orderly?
If it becomes clear on Sunday to the Greek government that there is no path they are able and willing to take in order to receive a further bailout, they will have to decide whether to play nicely with the European Central Bank by declaring their exit and working with the rest of the EU to make this as orderly and painless as possible for all concerned. Alternatively, they may decide to simply requisition the Greek Central Bank, print some kind of Euro-denominated emergency currency, and loudly state that as far as they are concerned they are members of the Euro and that they are going to begin legal action against the ECB and other concerned parties?