Greece: Banks Remain Closed, Europe in Ruins
Financial markets, which have been relatively unmoved by the crisis were more nervous on Thursday, with the borrowing costs of Spain and Italy hitting their highest levels in several months.
Credit ratings agency Standard and Poor’s warned that Greece’s economy would contract by another 20 percent within four years if the country made a distressed exit from the euro. Greek GDP has already shrunk by 25 percent since 2009, and more than a quarter of the workforce is unemployment, including more than one in two young people.
Italian and Spanish bond yields fell from the day’s highs while stocks rose on Tuesday after a report that Greek Prime Minister Alexis Tsipras was considering a last minute aid proposal by the head of the European Commission.
Greek daily Kathimerini said Tsipras told Brussels he was considering Jean-Claude Juncker’s latest offer after he called a referendum for Sunday on an earlier proposal.
Italian 10-year bond yields fell from the day’s highs to trade flat on the day at 2.37 percent while Spanish equivalents were 1 basis point higher at 2.35 percent, also retreating from the day’s peaks.
A so-called Grexit would worsen an already desperate situation for Greek banks, and would have severe consequences for the economy and non-financial companies, S&P said.
However even for Greeks with a lot to lose, the resentment towards lenders blamed for squeezing society to its limits means the result of the vote remains hard to predict.
For Greek voters, the sight of banks closed and long lines of pensioners queuing for cash has been a deep shock and a reminder of the potential cost of being shut out of the euro, the symbol of Greece’s membership of modern Europe.
“People are waiting just to take out 50 euros, and we see the government does nothing, they do nothing,” said 47-year-old lawyer Nicole Papathanasopoulo, expressing the bewilderment many feel after repeated rounds of offers and counter-offers.
“They send a third proposal and at the same time they ask the people to say their opinion about the proposal that doesn’t exist any more. It’s crazy. We don’t know what to do.”
With banks closed for a fourth day and capital controls in place, Finance Minister Yanis Varoufakis tied his fate to the outcome of the vote, saying he would resign if the government’s call for a “no” to the bailout terms were ignored. The future of Prime Minister Tsipras would be similarly in doubt.
“People have lost it completely. And it’s all the fault, one hundred percent, of all the politicians. They are to blame for the situation we are in now,” said pensioner Thanos Stamou.
On Sunday then it will fall to the Greek people to decide an issue that their government was unable to settle in months of acrimonious negotiations with their European partners.
“The future of Greece is in the hands of the Greek people,” said Jeroen Dijsselbloem, the Dutch chairman of the Eurogroup of euro zone finance ministers.
“If the outcome is positive, then there is naturally, on the European side, the willingness to help Greece out of the gutter,” he said. “If the result is negative, then the future will be a lot more complicated.”
For Tsipras, the stakes are high. His government is expected to fall if voters back a bailout plan which he has rejected as a “humiliation” for Greece.
Already, his coalition is crumbling as a succession of deputies from the right wing Independent Greeks party, his junior partners have thrown their weight behind the ‘Yes’ vote.
Tsipras and his finance minister Varoufakis remain convinced
Athens could negotiate better terms, including debt relief, if Greek voters reject the conditions on offer.
Asked by Bloomberg Television whether he would still be in office on Monday evening if Greeks voted “yes”, Varoufakis, a Marxist economics professor, said: “I will not … I personally will not sign another extend and pretend (agreement).”
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