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Debt crisis: Greece govt 'may resign' if referendum goes against it

Greece's radical Left-wing government suggested it would quit if it fails to get its way in a make-or-break referendum on Sunday that could decide the country's financial future.

world Updated: Jul 02, 2015 17:16 IST

Greece's radical Left-wing government suggested it would quit if it fails to get its way in a make-or-break referendum on Sunday that could decide the country's financial future.

Greek finance minister Yanis Varoufakis said the government "may very well" quit in a radio interview Thursday in which he also said "we are on a war footing" to ensure the rushed referendum happens in time.

International creditors and markets are stepping back after days of dizzying drama over the Greek crisis to watch the outcome of the consultation at the weekend.

Ordinary Greeks, though, are left in financial limbo under capital controls imposed all this week to stem a bank run. They are reduced to 60-euro ($67) daily ATM withdrawal caps, adding hardship to lives already ground down by years of austerity.

An in/out vote on the euro?

Although Athens insists the referendum is narrowly on tough austerity conditions attached to a bailout that expired on Tuesday, EU leaders say it is a vote on whether Greece wants to remain in the euro.

The Greek government led by Prime Minister Alexis Tsipras is fiercely campaigning for a 'No' vote, believing rejecting the bailout conditions would strengthen its hand in negotiations with creditors.

On Tuesday, it failed to repay 1.5 billion euros ($1.7 billion) to one of those creditors, the International Monetary Fund.

Athens is in danger of failing in arrears to two other major creditors, the European Union and the European Central Bank, if it also fails to pay 3.5 billion euros on July 20.

EU leaders, including those of Greece's biggest creditors Germany, France and Italy, have all said they would view a 'No' result in the referendum as a rejection of Europe.

But if the 'Yes' wins, Varoufakis said in his interview with Australian public radio network ABC that the government could hand over to a caretaker administration.

"Yes, we may very well do that. But we will do this in the spirit of cooperation with whoever takes over from us," he said.

In any case, he told Bloomberg TV in a separate interview, he "will not" continue to serve as finance minister in that event.

A survey published in the Greek press on Wednesday said 46 percent of voters intended to vote 'No', down from the 57% recorded just days earlier before the banking restrictions.

"I'm going to vote 'Yes' because we're more secure in Europe.... I blame Tsipras for this crisis, and certainly hope he steps down if the

'Yes' vote wins," Marin Bouboura, a 38-year-old former banker who lost her job in the crisis and now works as a secretary, told AFP in Athens.

Elizabeth Markos, a philosophy student sitting in a park in the capital, said she was "definitely voting 'No'".

She added: "All the creditors care about is getting the money back, they are suffocating us. If we don't free ourselves it will be the pensioners, the poor, the students who pay, and there will be no future for Greece."

'Exhausted' with Greece

The prospect of a new Greek government would bolster EU partners who say they are exasperated with what they see as the erratic behaviour of the current Greek government.

"We're exhausted," said one of the 18 eurozone finance ministers who had been negotiating bailout terms with Greece before its sudden referendum announcement last Friday.

"We tried right to the end to find a collective solution," said the minister, who asked not be identified.

He added that a letter Tsipras has sent on Tuesday offering concessions towards what the creditors had been demanding in return for a new bailout opened a "possible" path to agreement -- but that was trashed when the Greek prime minister within hours gave a television speech urging his citizens to reject those conditions by voting 'No'.

The chief of the European parliament, Martin Schulz, told the German newspaper Passauer Neue Presse that Greece's negotiating strategy was "very frustrating and disappointing, but especially dramatic for the Greek people".

Tsipras's changing tack so often "is really tiring and a lot of people have had enough," he said.

The rest of the European Union is relieved to see the Greek crisis has had relatively little impact on the markets, suggesting any contagion from a possible Greek exit from the eurozone -- a Grexit -- was contained, so far at least.

"Markets seem to be of the opinion that post referendum, some agreement will be reached," Con Williams, an agricultural economist at ANZ Bank New Zealand Ltd., wrote in a client note, according to Bloomberg News.

No quick solution after vote

Analysts, including Carsten Brzeski, chief economist at ING-DiBa bank, said that while the eurozone would likely not let Greece fall in the event of a 'No' vote, "too much trust has been destroyed" by Tsipras in the negotiations.

"The inconvenient truth on the Greek referendum is that neither a 'Yes' nor a 'No' vote will quickly lead to a solution," he wrote in a note.

But Holger Schmieding, at the German bank Berenberg, said a 'No' vote would mean a "very high" risk of Grexit.

"After a 'No', the Greek economy and its banks would descend deeper into chaos," with access to euros probably cut off.

"Greece would have to print its own money after a brief and probably tumultuous interlude," he said.