The Greek referendum: Raising the stakes

DESPITE twists and turns, there appeared to be the makings of a deal between Greece and its international creditors—euro-zone governments and the IMF—in further negotiations on Friday, which would allow urgently needed bail-out funds to be released shortly. That changed abruptly when Alexis Tsipras, the Greek prime minister and leader of the radical-left Syriza party, announced late that night on television that he was calling a referendum on the creditors’ proposals, to be held on Sunday, July 5th. Euro-zone finance ministers who were due in any case to meet in Brussels today to decide upon their next move have yet to respond. But it is clear that Mr Tsipras’s move takes the dispute into perilous territory, bringing Greece closer to the edge of leaving the euro.Already on Saturday pictures of anxious savers queuing outside banks to withdraw money were circulating. A slow-motion bank run that had already drained €35 billion ($39 billion) of household and corporate deposits out of the Greek banking system between November 2014 and May 2015 threatens to get out of control. Greek banks have been able to cope with the haemorrhage of deposits only thanks to massive borrowing from the Bank of Greece, permitted by the European Central Bank (ECB) in Frankfurt. The ECB is now likely to call time on this and to prevent further increases in this “emergency liquidity assistance” …

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