Eurozone in limbo as Greece votes on high-stakes bailout referendum today

Greece and the entire eurozone are in limbo as the country votes in a crucial referendum on bailout conditions on Sunday.

Greece was officially declared in default on Friday by the European Financial Stability Facility, which holds 144.6 billion euros ($160 billion) of Greek loans.

Athens has just missed an IMF loan payment deadline, the first time that has happened to an industrialised country. If it defaults on a July 20 payment to the ECB, Greece might have to withdraw from the 19-nation eurozone.

Greek Prime Minister Alexis Tsipras is gambling the future of his 5-month-old left-wing government on the snap poll — insisting that a “no” vote would strengthen his hand to negotiate a better deal with the country’s creditors, and a “yes” would be a capitulation to their harsh demands. The opposition accuses Tsipras of jeopardizing the country’s membership in the eurozone and says a “yes” vote is about keeping the common currency. Tsipras’ high-stakes standoff with lenders— the European Union and the International Monetary Fund — resulted in Greece defaulting on its debts this past week and shutting down banks to avoid their collapse, and lose access to billions of euros after an existing bailout deal expired. [caption id=“attachment_2321036” align=“alignleft” width=“380”]  Protests in Greece. AFP[/caption] The sense of urgency was palpable all week when Greeks struggled to decipher a convoluted referendum question while being bombarded with frenzied messages of impending doom or defiance. A series of polls published Friday at the end of a frantic weeklong campaign showed the two sides in a dead heat, with an incremental lead of the “yes” vote well within the margin of error. They also showed an overwhelming majority of people — about 75 percent — want Greece to remain in the euro currency. Meanwhile, Greece’s Finance Minister Yianis Varoufakis launched a salvo at other eurogroup nations, accusing them of holding out on a bailout deal to allow bank coffers to run dry so they could spring a “vile ultimatum” on the government to accept what he called a humiliating deal. Writing in the Saturday edition of daily Kathimerini, Varoufakis said other eurogroup members rejected Greece’s “honorable” counter-proposals and insisted on extracting “humility.” Varoufakis said accepting the creditors’ terms would be a “permanent condemnation” while rejecting it would offer the “only prospect for recovery.” With speculation swirling on the referendum’s impact on Tsipras’ government, Greece’s Deputy Prime Minister Yiannis Dragasakis denied media reports that he would accept to lead a new “grand coalition” government. “The country has a prime minister who will have an even stronger popular mandate and support. I will serve this mandate on my part,” he said in a statement.

Here is a look at recent financial and political drama in Greece

Saturday, June 27: Prime Minister Alexis Tsipras calls a referendum on whether or not to accept the terms of the latest round of bailout aid. “The people must decide free of any blackmail,” he tells the nation at 1:00 am local time (2200 GMT).

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Eurozone finance ministers decide to let a Greek rescue plan expire on June 30, effectively ending talks with Athens on more aid. Greeks start withdrawing large sums of money from ATM cash machines.

Sunday, June 28: The European Central Bank (ECB) says it will maintain an emergency cash lifeline to Greece but not increase its level, raising the risk of a liquidity crunch.

Greek officials enact capital controls that limit ATM withdrawals by Greeks to 60 euros ($65) per day and close banks until July 7.

Pensioners without bank cards can withdraw money from banks however, and foreign tourists are not subjected to the limit.

Monday, June 29: European Commission head Jean-Claude Juncker says he feels “betrayed” by the Greek actions. Tsipras publicly doubts Juncker’s “sincerity” as relations between the two sides hit a new low.

Tuesday, June 30: Tsipras seeks a 30-billion-euro deal with the European Stability Mechanism (ESM) to cover state financing needs and restructure Greece’s crushing debt.

At midnight, Greece misses the deadline to repay 1.5 billion euros in loans to the International Monetary Fund (IMF).

Wednesday, July 1: German Finance Minister Wolfgang Schaeuble presses Athens to “clarify its position on what it wants”.

Thursday, July 2: Greek Finance Minister Yanis Varoufakis says he will resign if voters do not back the government on Sunday. It has urged voters to reject the terms of a rescue package that has already expired but which could be the basis for future talks. Tsipras says this will strengthen Greece’s position.

The IMF estimates that Greece needs 50 billion euros over the next three years, including 36 billion euros more from EU lenders, and debt relief to stabilise its finances.

Friday, July 3: The EFSF declares “an event of default by Greece” after the missed IMF payment. It has nonetheless “decided not to request immediate repayment of its loans nor to waive its right to action,” a statement says.

Tsipras calls for a 30 percent cut of the Greek debt and a 20-year grace period for the rest. Total Greek debt is 323 billion euros, or nearly 180 percent of its gross domestic product (GDP).

European Commission chief Juncker says Greece’s negotiating position with creditors would be “dramatically weakened” in the event of a “No” vote in the referendum.

Crowds gather at rival rallies in central Athens – the biggest of the referendum campaign – with Tsipras telling supporters a “No” vote would strengthen his hand in talks.

Saturday, July 4: As tensions grow on the eve of the vote, Varoufakis accuses Athens’ creditors of “terrorism” and scare-mongering, denying reports that Greek savers could lose 30 percent of their deposits to shore up the banks.

Sunday, July 5: Referendum on conditions attached to a bailout extension offer made to Greece last month which expired on Tuesday.

Tsipras has called the vote “a time of responsibility and democracy meant to the silence the sirens of destruction”.

Agencies