As David Cameron moves to placate the unappeasable appetite of Tory Eurosceptics with an EU referendum, Greece defiantly loiters at the exit door of the Euro.
After so far failing to negotiate the €1.5bn debt-repayment Greece owes by June 30th, the IMF and Greece are at an impasse. "The ball is very much in Greece's court" said Gerry Rice, spokesman for the IMF. Greek PM Alexis Tsipras responded, "We will patiently wait until creditors turn to realism".
Greece and her troika of creditors must convert marathon talks to agreement to secure their bailout payment; otherwise Greece may default, nudging them toward Grexit. As the Eurozone continues to be mired in economic chaos, with moves to hand more sovereignty to Brussels, it is not the ideal backdrop to the campaign to stay in the EU.
For more insight on the ramifications of a possible Grexit I spoke with Eric Dor, Director of Economic Studies at IESEG School of Management in Paris/Lille, who has published a 'user guide' to leaving the Eurozone.
Acting as a firewall for distressed Eurozone counterparts, there is a risk of contagion to these larger economies should Greece default/exit. New measures to prevent contagion include the European Central Bank morphing into a lender of last resort, a quantitative easing programme to buy sovereign debt and the Eurozone's own version of Hank Paulson's 'bazooka in the pocket', the European Stability Mechanism which has a further lending capacity of €453bn.
A Grexit would create what Dor calls a "harmful perception of reversibility" in the Eurozone, with other Eurozone countries wishing to borrow money in the future incurring a risk premium from markets unsure of their ability to repay. Dor states he is "reasonably optimistic" that contagion could be managed but moderate risk remains.
Despite fears of a looming June deadline for Greece, IMF Managing Director Christine Lagarde is only obliged to notify the IMF Board one month later, realistically giving Greece until July 31st to make a deal before legal implications kick in. Compelled to declare Greek banks insolvent, the ECB could no longer provide funding. A liquidity crisis would occur (since other banks dare not lend to Greek ones). Capital controls would be created, including a parallel currency of IOUs and curtailing credit card spending when Greeks are abroad.
Another capital control to stop Greeks moving cash across the border could restrict the freedom of movement principle - an embarrassing development for David Cameron and the EU leaders who have refused to consider any change to that policy.
Portrayed as jointly implacable, differences exist between Greece's creditors. Germany might see the ramifications of austerity on the EU project as a whole, but the IMF sees further cuts as simple mathematics. As Dor explains, many of Greece's loans don't mature until 2055 and repayments don't begin until 2020 but it is the current repayment of initial loans that are an acute difficulty for Greece.
Knowing that a relative period of relief isn't far off, the IMF can freeze the €7.2bn funding now to pressure Greece to accept further pension raids and a VAT rise. Dor questions this, "Putting the integrity of the Euro and the current €320bn exposure at risk is verging on ridiculous just for a few billions". China and India - irritated their warning that Greek debt would remain unsustainable went unheeded - want to see the IMF push Greece to accept new cuts.
For the Eurosceptic campaign, the Eurozone could be characterised as the next coalition of chaos, appearing messy and undemocratic. Cameron has been warned the referendum may turn into his version of the Maastricht Treaty, destroying his authority within his party.
Creating a club within a club, the Maastricht Treaty created the Euro and a two-speed EU but failed to produce a lender of last resort and a monetary union - both of which are now being messily remedied in the background of an EU debate at home. An EU agenda fixated on a Eurozone crisis and the obvious flaws in the design are, as Eric Dor worries, easily cited by Eurosceptics as what happens when power is devolved to Brussels.
A Grexit would condemn the EU as a fluid union, casting a damning legacy in the lead up to a British referendum on membership. As we have seen in the AV referendum in 2011, and the French Euro referendum - it is often not about the question itself, but instead about the mood of the electorate.