IMF warns of huge financial hole as Greek vote looms

Aris Messinis, AFP | Alexis Tsipras wants a referendum on the bailout plan and wants Greeks to vote ‘no’.
4 min

Duelling rallies were expected in Greece on Friday, a day after the IMF warned of the huge financial hole facing Greece as angry and uncertain voters prepare for a Sunday referendum that could decide their country’s future in Europe.


Days after Greece defaulted on part of its debt, the IMF (International Monetary Fund) – part of the “troika” of lenders behind successive international bailouts – said Greece needed an extra €50 billion over the next three years, including €36 billion from its European partners, to stay afloat. It also needed significant debt relief.

The assessment, in a preliminary draft of the IMF’s latest debt-sustainability report, underlines the scale of the problems facing Athens, whatever the result of Sunday’s referendum on the bailout offered by creditors last month.

Prime Minister Alexis Tsipras’ rejection of what he terms the “blackmail” of EU and IMF creditors demanding spending cuts and tax hikes has so angered Greece’s partners that there is no hope of reconciliation before Sunday.

With banks closed for a fourth day and capital controls in place, the future of the left-wing government hangs on the result, given the angry mood of voters in Greece, torn between resentment of the lenders and scorn for their own politicians.

“People have lost it completely. And it’s all the fault, one hundred percent, of all the politicians. They are to blame for the situation we are in now,” said pensioner Thanos Stamou.

On Sunday it will fall to the Greek people to decide an issue that their government was unable to settle in months of acrimonious negotiations with their European partners.

Consequences of the referendum

“We are asking them to vote with their eyes open and think hard about all the consequences of a ‘No’ vote, which could lead Greece to leave the euro zone,” French Prime Minister Manuel Valls said on the sidelines of an economic summit in Lyon.

The comment reflected the fear of many in the euro zone that a Greek exit would change the nature of a 15-year-old currency union intended to be unbreakable.

For Tsipras, if voters back a bailout plan that he has scorned, his government is likely to fall, leading to new elections by September.

Already, his coalition is crumbling as a succession of deputies from the right-wing Independent Greeks, his junior partners, have backed the ‘Yes’ vote.

Tsipras and his finance minister, Yanis Varoufakis, remain convinced Athens can negotiate better terms, including debt relief, if voters reject the conditions on offer. But both have signalled they will quit if voters choose the bailout.

“I want to believe that these problems won’t last long,” Tsipras said on Thursday of the bank closures. “The banks will open when there is a deal,” he said in a television interview, predicting it would come within 48 hours of the referendum.

Tsipras’ government came to power in January vowing to protect pensioners, and much of the argument with creditors stemmed from his refusal to accept the pension cuts that they demanded.

With unemployment over 25 percent, and youth unemployment over 50 percent, the plight of pensioners, who may be providing the only source of income for families, is acutely sensitive.

Both ‘no’ and ‘yes’ vote supporters will bring their campaigns to an end on Friday with simultaneously held rallies.

The events will happen 800 metres (875 yards) apart in the centre of Athens.

Protests in Paris

Thousands of French protesters also took to the streets Thursday, urging Greek voters to reject austerity imposed by the European Union in an implicit call for them to vote “no” in a weekend referendum on a cash-for-reform deal with creditors.

The protest in Paris, organised by left-wing rebels within the ruling French Socialist party, goes against the line pushed by President François Hollande’s government that a “no” vote would be a dangerous step towards a possible exit from the euro zone.

Police put the number of protesters in the Bastille Square, a focal point of the 1789 French revolution and a traditional rallying place for protesters, at around 3,000.

But a Harris Interactive opinion poll showed two thirds of those questioned in France wanted European countries to stop lending to Greece and 53 percent believe Greece will not pay back any its debts. Only 4 percent think it will pay everything back.

The IMF analysis suggested that, even on the most optimistic assumptions, the Greek economy would remain on life support for many years to come, and that Athens would be forced to persuade its European partners to help.

The ratings agency Standard and Poor’s said Greece’s economy, which has already shrunk 25 percent since 2009, would contract by another 20 percent within four years if it made a distressed exit from the euro.

(FRANCE 24 with AP and REUTERS)

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