We are approaching the end game in the conflict between Greece and its creditors. How likely is it that Greece will leave the euro? It is much more likely now than ever before. Brinkmanship is a national sport in the EU, but we are now at the limits of what is negotiable.
The banking system has basically been suspended until the referendum on July 5 following the introduction of capital controls on Monday, June 29, caused by the European Central Bank’s freeze on emergency liquidity assistance at current levels. Everyone knows that Greece is insolvent if there is a “No” vote. I cannot see the eurozone countries renegotiating the bailout deal in the event of that happening, so a “No” vote would probably be the beginning of the end.
If there is a “Yes” vote to endorse the bailout deal, it’s clear from the most recent statements that there will be a political crisis in Greece: the ruling government will not wish to impose further austerity, which it regards as unacceptable, and which some economists see as having worsened the plight of the Greek economy. (Greece’s GDP has shrunk by 25 percent between 2008 and 2015.) This could then lead to political stalemate in Greece which might mean the crisis is merely postponed.
