Get in line or get out of the eurozone, EU tells Greeks
By James Chapman
Get in line or get out of the eurozone, EU tells Greeks as Cameron warns of ‘global storm’ threat to Britain’s economy
Greece was last night threatened with enforced bankruptcy and ejection from the euro as David Cameron warned of a ‘global storm’ threatening to drag down Britain’s economy.
As the eurozone reeled from Greek prime minister George Papandreou’s announcement of a referendum on the single currency rescue deal, Germany and France said they would cut off its bailout cash until its people voted in favour.
Sources said the latest payment of almost £7billion from the EU and International Monetary Fund, due to be made soon to Athens, would be placed on hold until after a referendum.
The EU is attempting to bully Greece into holding a popular vote on the country’s future membership of the EU and eurozone, rather than a more narrow question relating to deeply unpopular austerity measures.
And Germany is insisting there is no possibility of renegotiating the rescue deal struck at a Brussels summit last week.
It would see half of Greece’s towering debts written off but the stricken country faces a decade of tax rises and spending cuts.
A Greek government spokesman insisted last night that the referendum, expected to take place next month if the government survives that long, will ask voters about the bailout, not euro membership.
The threat to cut off the emergency funding risks inflaming public opinion in the country, which is already seeing a sharp rise in anti-German sentiment.
An EU source added: ‘The sooner Greece holds the referendum, the sooner the sixth tranche will be paid. But right now, it isn’t going to be paid. Not only are [Greece] putting at risk their country, which I think is incredible, but they are putting at risk the euro area stability, and this is too much.’
Without the sixth tranche of funding, due to be paid in the middle of this month, Athens only has enough cash to keep afloat for a few more weeks.
And if the Greek government fails to win a knife-edge vote of confidence tomorrow, then snap elections will follow, which are expected to see the opposition – which is opposed to the rescue deal – win power.
There are mounting fears that the country will end up crashing out of the euro, and increasing alarm that Italy – the world’s eighth-largest economy – is also on the brink of economic calamity.
Professor Simon Johnson, former chief economist at the IMF, said: ‘We must step back and reform the system. We are looking straight into the face of a great depression.’
Former Labour Chancellor Alistair Darling said: ‘It is not at all clear how on earth Greece is going to get out of its deficit even if the referendum passes.’