The EU is already ready for the Greek default – lanacion.com (Argentina)

PARIS The European Union (EU) was confronted yesterday the worst of nightmares: the default of Greece, which could occur after tomorrow, and subsequent exit from the euro zone <. / p>

That final feared became more palpable than ever after the Greek prime minister, Alexis Tsipras, the night before last convened a referendum on the demands of international creditors for Sunday July 5.

Outraged, its partners in the euro zone declined to extend the current aid plan. The breakdown of negotiations, apparently ultimately threatens to cause a bank run and a playpen, followed by the inability to cope with the maturity of 1.6 billion euros to be paid by Greece to the IMF. If Athens fails to meet that commitment, will enter the process of default.

The default could put Greece in the same situation met Argentina in 2001

“The decision Tsipras to reject the offer of international creditors [the European Central Bank, European Commission and IMF] and call referendum “sabotaged” the ongoing negotiations, which would have allowed unlock 15.300 million euros in a new program of assistance Greece desperately needs, “lamented Jeroem Dijsselbloem, the Dutch Finance Minister, who chaired the meeting yesterday in Brussels Eurogroup, described as” last chance “.

posts between the sword and the wall, the other 18 Eurogroup ministers remained together until late at night to discuss possible consequences for Europe from defaulting after tomorrow, when the current program expires rescue, and then the “Grexit” (a Greek exit from the euro). In other words, when the Greeks go on Sunday to the polls, the country will be technically in default and probably the government will be obliged to apply strict capital controls to prevent the bankruptcy of all banks.

This is the most immediate fear. The Greek banking system is currently under respiratory assistance due to liquidity programs allowed by the ECB.

But the dramatic consequences of the situation were already visible yesterday when long queues of depositors waited for hours against distributors to withdraw as much money as possible for fear of “corralito” (see separate article).

The night before last, after the announcement of Alexis Tsipras, the government reinforced the police presence around bank. Agencies

The heads of the Central Bank of Greece and the ECB will hold a teleconference today to discuss the modalities of implementation of capital controls from tomorrow.

One possibility would be to declare a bank holiday until the referendum has taken place, instead of restricting the movement of capital. Greek Finance Minister, Yanis Varoufakis said however that banks remain open.

Varoufakis regretted that the Eurogroup has rejected his proposal to extend the current bailout program. A little more time would have allowed both parties come to an agreement that the Greek government could have recommended to the voters, he estimated.

Optimistic, also he said that “a deal was still possible in the next three days “.

A risky move

For many, however, Tsipras decision should be interpreted as a real play passably masterful poker … .

Greece, the country where democracy was born, placed in the hands of citizens a commitment that the government can not take, having been chosen to do the exact opposite.

Politically, Tsipras and circumvents the danger of presenting the program of reforms to parliament and risk the ultra-left wing of his party leave minority. Finally, the Prime Minister knows that, according to a poll of 24 and 26 June, 57% of Greeks are in favor of the conclusion of an agreement with international creditors, while only 29% claim an break.

But both Greece and the rest of the euro area will now enter a period of extreme uncertainty. For the first time, one of its members could be forced to abandon the single currency, with unpredictable consequences for all.

That is precisely the “plan B” last night trying to analyze the finance ministers of the Eurozone: how to prepare for the inevitable consequences of Greek default on the rest of the block. The most frightening scenario is that a “domino effect” occurs.

The danger is particularly acute in small countries, said Jacques Sapir, director of the research group IRSES.

Sapir It provides that, in case of “Grexit” markets try to “test” the ability of the eurozone to defend its political unity, attacking some weaknesses in the euro area: Portugal, Slovenia and Cyprus, for example

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Will those countries willing to invest billions of euros to prevent infection? Are these enormous sums never again let the European economy bloodless? A Greek default on securities ECB certainly require the institution to apply for a capital increase in the Member States, for their reserves, already fragile, has weakened further in recent months.

Harassed by these were dark clouds, European accelerate their preparations.

“The plan B is becoming Plan A”, they acknowledged yesterday in unison Finnish Minister Alexander Stubb and the Spanish Luis de Guindos. The Greeks, meanwhile, can now only expect a miracle from the gods of Olympus.

How follows the Greek drama

7200

Millions of euros

It is the help that Greece and its creditors were negotiating unlock exchange for a reform plan

1800

Millions of euros

This is the debt that Athens must settle with the IMF after tomorrow; but does not have the money necessary

July 5

Referendum

The Greek call for a consultation on that date to decide whether to accept European reforms defeated the dialogue

Plan B

The finance ministers of the eurozone will discuss alternatives to Greece the background of a possible bankruptcy and leaving the euro

Support

• The leader of the finance ministers eurozone, Jeroen Dijsselbloem said Greece must take steps to protect their financial systems, and said willing to provide technical assistance
• In recent weeks increased the outflow of deposits from Greek depositors fearing bankruptcy or exit from the euro, leading the government to impose capital controls to stem the bleeding
• The European Central Bank will decide today if you keep an assistance mechanism to Greek banks, the Commonwealth, effective February and at this time the only source of liquidity in the local financial system
• Without liquidity, the government might be forced to issue notes for the salaries of public employees and pensions, then it could leave the euro and introduce another currency
• Back to the drachma or use another devalued currency against the euro could make more competitive the Greek economy, but complicate its ability to import
• If the Greeks choose to vote in the referendum for the European proposals, the government could ask international organizations negotiating another rescue

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