'Events are now spinning out of control' in Greece

Milos Bicanski/Getty Images

Ambrose Evans-Pritchard at The Telegraph has just dropped a bomb on the situation in Greece.

Writing in The Telegraph on Tuesday, Evans-Pritchard reports that the Greek referendum unexpectedly called last Friday and held this past Sunday, was called in anticipation that Greece’s controlling Syriza government would lose.

That’s right: Greek prime minister Alexis Tsipras called a referendum on the latest bailout terms offered to Greece, campaigned that the Greek voters should vote “No” and reject these measures, and expected the vote would still be a “Yes.”

Instead, the vote was an overwhelming “No,” with 61% of the votes going that way and Syriza seeming to have won a huge victory.

But as Evans-Pritchard outlines in his bombshell report on Tuesday, everything is falling apart for Syriza, prime minister Alexis Tsipras, and the entire country of Greece.

“What should have been a celebration on Sunday night turned into a wake,” Evans-Pritchard writes.

“Mr Tsipras was depressed, dissecting all the errors that Syriza has made since taking power in January, talking into the early hours. The prime minister was reportedly told that the time had come to choose, either he should seize on the momentum of the 61pc landslide vote, and take the fight to the Eurogroup, or yield to the creditor demands — and give up the volatile [Greek finance minister Yanis] Varoufakis in the process as a token of good faith.”

Varoufakis resigned in the middle of the night on Sunday, and news broke that Tsipras and Varoufakis’ replacement — Euclid Tsakalotos — would head to Brussels for an emergency meeting on Tuesday.

When they showed up at the meeting on Tuesday, they didn’t have a plan.

As Evans-Pritchard reports, “Syriza has been in utter disarray for 36 hours… Events are now spinning out of control. The banks remain shut. The ECB has maintained its liquidity freeze, and through its inaction is asphyxiating the banking system.”

A report from Reuters on Tuesday indicated that Greece’s banks only have 2 days of cash left. And this after ATM withdrawals have been limited to 60 euros per day for over a week now.

On Monday, the European Central Bank declined to increase its emergency lending assistance to Greece, meaning that Greek banks won’t have access to any more cash from the ECB. Greece last week, and again on Monday, had requested an increase in the ELA.

Greek greece bank atm line queueREUTERS/Stefanos RapanisPeople line up to withdraw cash from an automated teller machine (ATM) outside a National Bank branch in Iraklio on the island of Crete, Greece June 28, 2015.

Reports on Mondayalso indicatedthat Greek banks will be closed at least through Wednesday, but now it looks like the bigger question is how the banks will re-open at all.

When results of Greece’s referendum came in, Wall Street banks were nearly unanimous in saying that the most likely scenario for Greece is an exit, or Grexit, from the euro.

According to Evans-Pritchard’s report, Tsipras rejected a “triple plan” devised ahead of the referendum and aimed at avoiding a Grexit by firing the Bank of Greece governor, seizing all cash stowed away in various central bank branches, and issuing a parallel currency with IOUs denominated in euros.

Something like this plan, however, is what Tsipras might have to do anyway, according to Evans-Pritchard, as Greece has run out of options and run out of them fast.

The latest headlines out of Europe indicate that all 28 European Union members — not just the 19 members of the euro zone — will convene for a summit this coming Sunday, July 13.

Italian prime minister told Reuters on Tuesday that he is “not pessimistic” about this meeting, believing that a deal can be reached and this will be the final meeting on the issue.

Renzi added, however, that it is now up to Greece to come up with a plan.

Read the full Evans-Pritchard report at The Telegraph here ยป

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