This morning, it looked like there was a chance for Greece and its creditors to work out their differences before a dramatic referendum scheduled for this Sunday. The morning after Greece’s bailout deal expired and the country failed to make a loan payment to the International Monetary Fund, Prime Minister Alexis Tsipras wrote a letter to the European Comission, the European Central Bank, and the IMF, saying he was “prepared to accept” most of the terms of the bailout—which he had rejected last weekend—with a few small adjustments concerning pension payments and the value-added tax in the tourist-friend Greek islands. Had Europe agreed to the proposal, or at least to new talks, it seemed possible that the referendum wouldn’t be needed at all. (There would be precedent for calling one off.)
But Greece’s creditors were immediately skeptical, particularly German Chancellor Angela Merkel, who said that last weekend’s deal is no longer on the table. After a conference call to discuss the Greek offer, Eurogroup President Jeroen Dijsselbloem announced that there would be no new talks until after Sunday’s referendum. “The political situation has not changed,” he said. “There are no grounds for an extension.”
Tsipras took to the airwaves for a defiant speech today, announcing that the referendum is still on and that he was urging Greeks to vote “no” on the bailout deal. He also denied that a “no” vote would necessitate a Greek exit from the eurozone. “A 'No' answer in the referendum would be an important step to getting a better deal—it does not mean a break-up with Europe," he said, adding, "Those who say the government has a plan to exit Europe are lying."
The European Central Bank announced late on Wednesday that it would continue emergency funding for Greek banks, but everyone is essentially in a holding pattern until Sunday’s vote on the original bailout package, rather than Tsipras’s amendment proposal. Polls show the “no” vote leading, but the gap is narrowing as capital controls, including limits on bank withdrawals, begin to to bite for ordinary Greeks. If they vote yes, a new bailout will likely be negotiated along terms similar to those proposed by Europe last week. If they vote, no, nobody really knows what happens.
Tsipras’s intentions have been hard to read. If the prime minister is intent on going out guns blazing, rejecting the European terms on principle and putting his fate in the hands of the voters, the conciliatory letter undercuts that. Tsipras is telling Greeks to take a leap of faith and reject a deal that, this morning, he didn’t seem entirely comfortable rejecting himself. If there’s a strategy at work here, neither global markets nor the country’s irritated creditors seem clear on what it is. I would imagine Greek voters are pretty confused as well.