The Greek crisis just got another dimension: in a dramatic speech, Greek PM Alexis Tsipras announced a referendum on the latest EU proposals which he just rejected. It will be held on July 5th, after the June 30th deadline. He asked the institutions (formerly known as the troika) for a temporary extension of a few days. The Eurogroup was planned to meet on Saturday at 12:00 GMT, but the Greek parliament convenes at 9:00 to vote on the referendum law to parliament.
There are less than 48 hours until markets open, and if nothing changes, it is going to be very messy. Some brokers are already getting ready as we’ve learned already before the dramatic announcement.
Tsipras flew back from Brussels to Athens to discuss the latest proposals. These proposals had not really received an applause from all creditors. Perhaps the IMF and others are actually against it.
This is what Tsipras said to his people:
We have been presented with an ultimatum, and it is the historic responsibility of our country and people to answer this ultimatum.
There was talk about a concession on pensions and VAT, but only a 5 month extension and no debt relief. Tsipras says the offers violate European values.
Some commentators see it as a vote on the euro or the drachma. It is still to be seen if this is a bold move or a wild gamble. Is it a negotiation tactic? It will be interesting to hear the reactions from the three creditors.
As an immediate step, they could withdraw the proposal and cancel the Eurogroup meeting. It’s a chance for them to move away from a suggestion that the three institutions weren’t that keen on anyway.
EUR/USD ended the week around 1.1165, up from the weekly lows and well above support. Nevertheless, the common currency lost a lot of ground on this tense week.
Here is some interesting commentary:
1 Tsipras is effectively calling for Greece to quit the euro. Even if that’s not the question, that’s what it will amount to.
— Hugo Dixon (@Hugodixon) June 26, 2015
And another one:
Worst case scenario: Eurogroup retracts proposal, does not accept xtension. IMF not payed Tue, Lagarde notifies Board Wed, EFSF cancels FAFA
— Yannis Koutsomitis (@YanniKouts) June 27, 2015
In our latest podcast, we discuss building on the US recovery, the Greek crisis and EUR, Saudi solar and next week’s events.
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