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A developing Greek tragedy: the EU game of chicken

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Blink and you will miss the breaking news. That is how fast developments are evolving during the past couple of days regarding the Greek crisis. Last week, we were “hours away from a deal”. Today we are debating whether Greece will remain a member of the Eurozone. But what exactly is going on?

The Greek debt crisis has been raging on since 2009. Since then, Greece has witnessed a lot and heard even more. As unemployment and poverty levels soar, people take their own lives, while celebrities and politicians are named and shamed for trying to save their own interests regardless of the fate of the country itself. Violent riots, demonstrations, uprisings and constant strikes became the norm in a country that markets itself as the cradle of civilization and democracy.

As the new left government swept to power in January 2015, on a mandate to renegotiate the terms of the bailout and harsh austerity, just a couple of months later, the Greek Prime Minister Alexis Tsipras bowed to pressure from international lenders for a Eurozone bailout extension of four months. Greece was facing a heavy schedule of debt repayments in the months ahead and even default unless its creditors disbursed the much-needed bailout funds.

Yet in mid-June, things took a dramatic new turn. Greece managed to delay big payments to the International Monetary Fund (IMF) by bundling them together as a €1.6bn payment due on the 30th of June.

But the tense all-day-all-night negotiations between Greek authorities and the European Commission-European Central Bank (ECB) and IMF yielded zero progress. Marathon talks, summits and councils were held. One hour the media was reporting that talks were close to an agreement; the other, that talks had failed. Greece and the creditors exchanged proposals, only the Greek ones were never thought to be enough for the creditors. Greek Finance Minister Yanis Varoufakis stated that he wasn’t even allowed to present the Greek case in one Eurogroup meeting.

The creditors’ main argument is that the Greeks have not set out concrete measures for reform that will allow for an agreement to be reached, while the Greeks denounce the institutions’ proposals as harsh, “absurd,” recessionary measures that will maintain austerity and keep an already impoverished people “enslaved.”

As the June 30th deadline looms closer, Greek banks are being kept afloat through the ECB, which kept increasing the Emergency Liquidity Assistance (ELA) ceiling. Yet, deposits begin to flood out of Greek banks as fear and uncertainty gather over Athens.

At around midnight on Friday, 26th June 2015, Greek Prime Minister Alexis Tsipras took everyone by surprise when he announced that the proposals put forth by the Troika would be put to a public vote in a referendum to be held on Sunday 5th July. Unsurprisingly the referendum announcement came just hours after European Council President Donald Tusk reportedly told Tsipras that it was “game over”, to which Tsipras warned him “not to underestimate the lengths to which a humiliated people can reach.” 

He clearly stated that the government was against these proposals and called the people to also reject these "absurd" measures. A media frenzy began in Greece in which the referendum on whether the people accept or reject the institutions’ proposals is being equated to the question of “Euro or drachma?” People are dividing into those who feel that Tsipras was bold in setting such an important aspect of Greece’s future to a public vote to demonstrate to the creditors that he has an entire country backing his rejection of their “brutal” proposals; and into those who view his action as a desperate move so as not to admit that he and his government have failed in the negotiations and are waiving all responsibility from it.

Already from the early hours of Saturday, Greek citizens stormed to ATMs, supermarkets and petrol stations amidst the speculation, uncertainty and increasing fear as to what the next days hold for Greece. Tsipras requested the Eurozone Finance Ministers, who convened urgently on Saturday, grant his country an extension of the current programme for a few days until the referendum.

The request was rejected. Eurogroup President Jeroen Dijsselbloem and many other Finance Ministers expressed their surprise with Greece’s “unilateral action to end negotiations.” They stated that the proposals had not been finalised and a comprehensive agreement had not yet been reached, but this move “closed the door to further negotiations.” The French Finance Minister with the EU Economic Commissioner later said there was still time for an agreement to be reached if Greece returned to the negotiating table, something that was later voiced by more Ministers, as well as German Chancellor Merkel and the French President Hollande.

The institutions withdrew their proposals, leaving the Greek referendum void of substance. Yet on Sunday, the European Commission, “in the interest of transparency and for the information of the Greek people,” published the proposals, noting that they could no longer be finalised because of Greece’s abandonment of the process. The Greek government responded immediately stating that this text was not the one sent to them as an ultimatum.

Meanwhile, Greek citizens continue to flock to ATMs and supermarkets. On Sunday evening, Tsipras appeared in another televised statement announcing that the Eurogroup's rejection of the extension requested was an "unprecedented insult" on a sovereign's people democracy and an attempt to blackmail the Greek people, adding that it resulted in the ECB maintaining (but not increasing) the ELA levels and forcing the Bank of Greece to impose capital controls, restricting the withdrawal amount to €60 per day and keeping banks and the stock exchange closed for the entire week.

On Monday 29 June at noon, the European Commission President Jean-Claude Juncker held a press conference outlining the events so far and stating that the proposals put forth by the institutions are a balanced package of measures that seek to stimulate reform and boost growth (all such reforms up till now have done the opposite), underlining that they do not include any cuts in pensions and wages - something that was refuted by both the Greek government and foreign reporters alike.

He called on the Greek government to tell the truth to its people and urged Greek citizens to vote “yes” in the referendum – however the question maybe finally formulated. He refuted the issuing of an ultimatum and accused the Greek government of suddenly abandoning negotiations and calling a referendum, reiterating that he tried to do everything possible for an agreement. “This is not the end of the process,” he said, as in Greece, the government echoed that the citizens need to learn the truth about what is happening.

While we continue to search for the facts, the media ensue their non-stop coverage of developments, conveying the gloomy atmosphere (caused not just by the cloudy weather) and the uncertainty that is prevailing through headlines that Greece is heading for a Grexit and is treading on unchartered territory.

Call it a game of chicken, a tug of war, or a dare game. However you label it, one thing is for certain: this is not a game. Not with the lives of at least 11 million people at stake. And maybe Greece could eventually fair well on its own currency, but the scar it will leave on a fragile monetary union that has not yet even been fully formed will be irrevocable.