There will be no more negotiations with Greece until after Sunday’s referendum, German Chancellor Angela Merkel said on Tuesday, leaving the Mediterranean country certain to default on its debt to the IMF. The government in Athens has until midnight on Tuesday to repay the bailout money, with Greek pleas for an extension dismissed by European leaders.
On Saturday, Greek Prime Minister Alexis Tsipras announced a snap referendum on whether to repay the debt, a move that would require Greece to impose further cuts to public services and hike taxes. Last week, European financiers offered Greece a fresh deal, one that Tsipras rejected despite the protestations of European Commission President Jean-Claude Juncker who said he had been “betrayed” by the Greek negotiators.
Tsipras decried the creditors' proposals saying it would ruin his country. On Tuesday, he requested a two-year deal that would see the Greek debt restructured. This was dismissed across the old capitals of Europe, with Merkel insisting that fresh negotiations would not start until after the July 5th vote.
The impasse leaves Greece certain to default on its loan, with one eurozone official telling Reuters there was "no way" finance ministers would release funds in time. A default would likely hasten the country’s exit from the single currency, with huge implications for both Greece and the rest of Europe. Merkel said: "This evening at exactly midnight Central European Time the program expires. And I am not aware of any real indications of anything else," while blaming Athens for not taking the proposed deal offering late last week.
Tsipras is hoping that firm "no" vote from the Greek citizenry might strengthen his hand in bargaining for better terms from the EU. However, European leaders have made clear Sunday’s poll is a vote on whether Greece stays or leaves the eurozone. The choice comes down to the "euro or the drachma," Italian Prime Minister Matteo Renzi said on Monday.
Those sentiments were echoed in Paris, with French President Francois Hollande expressing the stakes as “whether the Greeks want to stay within the eurozone." In London, British Prime Minister David Cameron called the July 5th poll an "in/out" vote on the single European currency, while in Germany Vice Chancellor Sigmar Gabriel said the vote would be "yes or no to the eurozone". Jean-Claude Juncker, head of the European Commission, said that voting "no" to a bailout deal would set Greece on a course to leave the euro, while noting he felt "betrayed" by Greek negotiators.
Still, Tsipras remains determined to forge a middle path -- one that rejects the current deal, but allows Greece to stay in the eurozone. Speaking on national TV on Monday, he told his countrymen to vote “no” to the creditors, stating this would enable him to renegotiate with the EU. "They will not kick us out of the eurozone because the cost is immense," he said. The uncertainty sent stock markets tumbling around the world, while borrowing costs for the single currency's smaller nations went up.
On Monday, British Chancellor of the Exchequer George Osborne warned that the cost of a Greek exit would be “traumatic.” He told the Commons there is "considerable uncertainty about what happens next," adding: "We hope for the best but we prepare for the worst." Like his European counterparts, the chancellor said the referendum "will effectively be a choice for the Greek people about whether their country leaves the euro."