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EU, IMF heap pressure on Greece days ahead of crucial vote

Friday, July 3, 2015 - 10:55
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The EU and IMF heaped pressure on Greece on Thursday, warning of the perilous state of the country's finances, days ahead of a controversial referendum that could determine its future in the eurozone.

[ATHENS] The EU and IMF heaped pressure on Greece on Thursday, warning of the perilous state of the country's finances, days ahead of a controversial referendum that could determine its future in the eurozone.

As Greece's leftist leaders staked their political lives on the outcome of Sunday's vote, the International Monetary Fund warned the country's growth prospects had deteriorated dramatically since the Syriza party came to power in January.

The Washington-based lender slashed its forecast for Greece's growth this year to zero, from 2.5 per cent, and warned it will need at least an additional 50 billion euros (S$74.8 billion) to stabilise its finances over the next three years.

The IMF - which along with the EU and ECB has lent Greece 240 billion euros since 2010 - also predicted any new bailout deal would rely more on Europe's largesse, including 36 billion euros from Brussels.

The bleak picture came as Greek Finance Minister Yanis Varoufakis warned the government "may very well" resign if Greeks spurn its call to vote "No", although Prime Minister Alexis Tsipras cast doubt on whether he would definitely go in a television interview.

Exasperated leaders in Brussels warned the eurozone would be plunged into "unknown" territory if the Greek government got its way in the vote, which they said was effectively a referendum on the country's place in the 19-country eurozone and even the EU.

European Parliament president Martin Schulz told German business daily Handelsblatt his confidence in Greece's leaders had reached "rock bottom" and said a "Yes" vote on Sunday would likely trigger new elections.

French President Francois Hollande, meanwhile, warned a "No" could send the eurozone "into the unknown", and the head of the Eurogroup of finance ministers, Jeroen Dijsselbloem, said: "In case of a 'No', Greece's situation will become exceptionally difficult."

Campaigning for the referendum kicked off in earnest on Thursday, with Greece's leaders saying a "No" vote would strengthen their hand in debt talks while EU leaders have cast it as a consultation on the country's membership of the eurozone.

There is also a chance the referendum may yet be cancelled or suspended: Greece's top administrative court, the Council of State, is to rule Friday on its legality.

The stakes are high for the country's 11 million people, who saw banks close this week and businesses shutter up in the latest economic blow after years of painful recession and austerity.

"Now it's only the banks. But if there's a run on supermarkets and fuel starts running out, it could lead to riots, to chaos, even to a coup by the sort of military junta which seized the country in 1967," said Georgiadis Aris, an Athens lawyer.

Tensions reached boiling point in the capital's central Syntagma square Thursday where scuffles broke out between anti-government protesters and riot police on the margins of a demonstration of 6,000 people.

At the same time, a smaller rally of 1,200 people backing the government's "No" stance gathered in front of the city's nearby university.

"There is no future for this country in the EU. Because of the austerity measures there is poverty, people dying in the street, committing suicide," said one 26-year-old woman taking part, Marta.

The plebiscite asks whether Greeks are willing to swallow the latest offer from its creditors of new austerity reforms in return for a bailout that expired just days ago.

Voter surveys have given no reliable indication of how the referendum will play out. One poll leaked to Greek media Thursday put the "No" camp at 43 percent, with "Yes" leading on 47 per cent.

Some EU officials have warned the outcome could determine Greece's future in the euro and even the EU, although Prime Minister Matteo Renzi of Italy - grappling with huge debt issues of its own - on Thursday sought to play down the risks.

"As far as I'm concerned, Greece will not leave the euro. It will do all it can to reach an agreement" with its international creditors, Renzi said on Rai 1 television.

Amid the confusion, global financial markets and Greece's creditors have all largely stepped back to watch the outcome, which comes after months of behind closed doors wranglings.

"This weekend could be the end of the line for Greece and the euro," said David Madden, market analyst at IG trading group.

But other analysts, including Carsten Brzeski, chief economist at ING-DiBa bank, said the eurozone would likely not let Greece fall even in the event of a "No" vote.

"The inconvenient truth on the Greek referendum is that neither a 'Yes' nor a 'No' vote will quickly lead to a solution," he wrote.

AFP