Tsipras calls referendum to break bailout deadlock

The news came late last night that Greek prime minister Alexis Tsipras would call a referendum on the bailout accord that international creditors have proposed to keep the country afloat.

Following an emergency meeting of his cabinet, Tsipras said his government had decided the package of austerity measures proposed by the country’s creditors – made in a last-ditch effort to avert default – would be put to popular vote. The referendum will take place on Sunday 5 July.

An ultimatum at odds with the founding principles of the EU

“After five months of hard negotiations our partners, unfortunately, ended up making a proposal that was an ultimatum towards Greek democracy and the Greek people,” he said in a national address, “an ultimatum at odds with the founding principles and values of Europe, the values of our common European construction.”

The leader, who only hours earlier had rejected the proposed reforms after several days of high-stakes talks in Brussels, said Greeks now faced a “historic responsibility” to respond to the ultimatum.

He said the reforms were “blackmail for the acceptance on our part of severe and humiliating austerity without end and without the prospect of ever prospering socially and economically”.

Tsipras had informed the leaders of France, Germany and Mario Draghi, the head of the European Central Bank about the decision. “I asked them to extend our current bailout by a few days so this democratic process could take place,” he said.

The referendum question

Greeks would be asked whether they wanted to accept or reject excoriating tax hikes and pension cuts that the EU, ECB and International Monetary Fund have set as a condition to release desperately needed bailout funds. Greece’s current rescue programme, already extended once, expires on 30 June.

Depositors, worried that capital controls may only be hours away, rushed to ATMs to withdraw savings. Queues quickly formed outside banks around the capital.

Prompted by the response, the government spokesman, Gavriel Sakellarides, insisted the plebiscite would not endanger Greece’s place in Europe. “The question is not whether we will remain in the eurozone. The Greek people should not be afraid,” he said in the early hours.

But Tsipras, whose radical-left Syriza party was catapulted into power five months ago on a platform of eradicating austerity, did not hide his own feelings for the accord.

Greeks, he said, were being subjected to “humiliation and blackmail”. “These proposals, which clearly violate the European rules and the basic rights to work, equality and dignity, show the purpose of some of the partners and institutions was not a viable agreement for all parties, but possibly the humiliation of an entire people,” he said.

“But I personally pledge that I will respect the result of your democratic choice, whatever that may be.” The Greek parliament, in an emergency step, would convene on Saturday so that the referendum could be called in line with the constitution. Several ministers emerging from the cabinet session said they would not support the “barbaric measures” being demanded of Athens by foreign lenders.

What they said

The energy minister, Panagiotis Lafazanis, who heads Syriza’s militant wing known as the Left Platform, said he would support a no vote against measures that had resulted in the widespread “misery and pillaging” of the country since its debt crisis exploded five years ago.

The recipient of €240bn in bailout funds – the biggest rescue programme in global financial history – Greece has seen its economy contract by more than a quarter, unemployment soar and poverty levels rise precipitously under the weight of draconian budget cuts and tax increased demanded by creditors.

“If the Greek people say a big no, it is going to be impossible for those who wield power not to take note unless democracy no longer exists.”

Yanis Varoufakis: tweeted: “Democracy deserved a boost in euro-related matters. We just delivered it. Let the people decide. (Funny how radical this concept sounds!).”

Merkel said she and Hollande had urged the Greek PM in a 45-minute private meeting to accept the creditors’ “generous” offer

The generous offer

The creditors laid out terms in a document handed to Greece on Thursday. It said Athens could have 15.5 billion euros in EU and IMF funding in four instalments to see it through to the end of November, including 1.8 billion euros by Tuesday as soon as the Greek parliament approved the plan.

The total is barely more than what Greece needs to service its debts over the next six months and contains no new money. Further funding would require a third bailout programme, which is politically impossible for the moment in Athens and Berlin.

The lenders also made a gesture towards Tsipras’ demands for debt relief by making a vague offer to reaffirm a 2012 pledge to consider stretching out loan maturities.

The ‘generous offer’ come at the price of pension cutbacks, new reductions in public sector salaries, an increase in taxes on food, eateries and tourism, and elimination of tax breaks on tourist islands. That has sparked protests in Greece, where one in four people are out of work.

Not the first time

This is not the first time that Greece has flirted with a referendum in recent years. Former Prime Minister George Papandreou sought one in 2011 as he struggled to impose painful cuts demands by lenders, but was ousted over the call and his administration replaced by a government of technocrats.

The latest drama came after weeks of phone calls, face-to-face-discussions and several rounds of meetings among European. In the latest round, German Chancellor Angela Merkel and French President Francois Hollande met Tsipras on the sidelines of an EU summit to coax him to accept an offer to fund Athens’ loan repaymentss until November in return for tax increases and pension cuts .