First thing this morning, when summarizing [5]the flurry of overnight events, we focused on today's final gambit by Greece:
"... moments ago Varoufakis was quoted as saying he would ask the Eurogroup for a bailout extension of a few weeks to accommodate the referendum.
And the punchline: if the Eurogroup says "Oxi", then the entire Greek gambit, which has been a bet that to Europe the opportunity cost of a Grexit is higher than folding to Greek demands, collapses.
If the Eurogroup declines Varoufakis' request, there simply can not be a referendum, as the "institutions proposal" will no longer be on the table. As such, the only question is whether the ECB will also end the ELA at midnight on June 30, adding insult to injury, and causing the collapse of the Greek banking system days ahead of a referendum whose purpose would now be moot."
And, as expected, with the Eurozone meeting on Greece having just ended after a brief hour of deliberations, AFP reports that the answer, was indeed, no.
#BREAKING [6]: Eurozone ministers reject Greek bailout extension: sources
— Agence France-Presse (@AFP) June 27, 2015 [7]
And then this:
- EUROGROUP PRESS CONFERENCE CALLED OFF IN BRUSSELS
- EURO-AREA FIN. MINISTERS TO CONTINUE TALKS WITHOUT GREECE: ANP
- EUROGROUP TO RECONVENE AFTER BRIEFING W/O GREECE: EU OFFICIAL
In effect, and very symbolically, Greece is already out of the Eurogroup. Worse: the referendum is now moot as the programs will expire on Tuesday night and Greece won't have anything actionable to vote on next Sunday.
What happens next: Eurogroup makes it official that the Greek proposal ends on June 30 making the referendum moot as the institutions proposal will no longer be on the table, the ECB pulls a "Cyprus" on Greek ELA [8], and a Greek bank system which is put on indefinite hiatus, leading to a "soft" Greek default if not outright Grexit, paving the way for even more ECB QE.
In the meantime, here is the live feed from the Euro-ex-Greece-Group where now only 18 countries are allowed to opine on the future of the costliest, and most artificial monetary experiment in history.
And here is the official Eurogroup Statement on Greece, whose most important line is the footnote: [9]
Since the 20 February 2015 agreement of the Eurogroup on the extension of the current financial assistance arrangement, intensive negotiations have taken place between the institutions and the Greek authorities to achieve a successful conclusion of the review. Given the prolonged deadlock in negotiations and the urgency of the situation, institutions have put forward a comprehensive proposal on policy conditionality, making use of the given flexibility within the current arrangement.
Regrettably, despite efforts at all levels and full support of the Eurogroup, this proposal has been rejected by the Greek authorities who broke off the programme negotiations late on the 26 June unilaterally. The Eurogroup recalls the significant financial transfers and support provided to Greece over the last years. The Eurogroup has been open until the very last moment to further support the Greek people through a continued growth-oriented programme.
The Eurogroup takes note of the decision of the Greek government to put forward a proposal to call for a referendum, which is expected to take place on Sunday July 5, which is after the expiration of the programme period. The current financial assistance arrangement with Greece will expire on 30 June 2015, as well as all agreements related to the current Greek programme including the transfer by euro area Member States of SMP and ANFA equivalent profits.
The euro area authorities stand ready to do whatever is necessary to ensure financial stability of the euro area.
[1] Supported by all members of the Eurogroup except the Greek member.
Presenting the Euro-ex-Greece-Group
