Greece fights back against austerity as European Commission chief rages at ‘egotism’ of referendum

In a half-hour address to a packed news conference in Brussels, he accused leftist Prime Minister Alexis Tsipras and his ministers of playing “liar’s poker” with the future of Europe.

He also said that if Greeks rejected what he called a final, fair offer from creditors to save them from bankruptcy, it would be taken as a signal that they wanted to quit the euro, and the EU.

Fears of a Grexit grew amid concerns that Greece will default on its loans from international creditors, with European and Wall Street stock markets plummeting as a result and thousands taking to the streets in Athens to rally against austerity.

Greek banks have closed and are expected to remain so until after the referendum, with customers allowed to withdraw only limited amounts from cash machines.

The Greek Government said the restrictions were necessary to protect the financial system after the European Central Bank (ECB) refused to extend emergency finance to Greece.

Greece is due to pay back £1.1 billion to the International Monetary Fund tonight and a default could trigger an exit from the Eurozone.

Yesterday Juncker blamed the breakdown in negotiations on the Greek Government’s decision to call a referendum. He said the talks were not a “game of liar’s poker” as “either all win or all lose”.

He went on to appeal to Greeks to vote yes to the EU’s proposals claiming a no vote could result in an exit from the euro.

German Chancellor Angela Merkel also maintained that Greece had been given a “generous offer” but conceded she would be open to more talks.

Yesterday the French Cabinet called an emergency session over the crisis, with President Francois Hollande later announcing that a deal could still be struck if Greece co-operated.

“There are a few hours before the negotiation is definitively closed, in particular for the prolongation of the Greek aid programme,” he said.

The crisis began on Friday, when Greek Prime Minister Alexis Tsipras called for a referendum on the terms of a new bailout deal, which he claims will further harm the already struggling Greek economy.

He wants voters to reject the proposals from the EU and IMF, which he says fly in the face of European values.

Following the referendum announcement he was refused an extension of the existing bailout.

The breakdown in talks follows months of negotiations between creditors and Tsipras, who came to power in January after promising to fight against the austerity measures imposed on his debt-ridden country.

Greece maintains it cannot make today’s payment although the government has pledged to pay £2.2bn due in pensions, social security payments and public-sector salaries.

When the international creditors refused to extend the bailout on Sunday, the government decided to close the banks to avoid huge withdrawals by anxious depositors.

Tsipras said the rejection of the request for a short extension of the bailout programme was “an unprecedented act” that called into question the ability of a country to decide an issue affecting its sovereign rights.

“This decision led the ECB to limit the liquidity of Greek banks and forced the central bank of Greece to propose a bank holiday and a restriction on withdrawals,” he said.

Greek finance minister Yanis Varoufakis said it was “appalling” that the prospect of the ECB turning off the tap was even being discussed.

He said the bailout proposals being put forward were “unviable” and would mean the country would be in exactly the same position just a few months down the line.

“Europe has to face up to the fact that it has lost its way,” he said.

He added that a Grexit was not inevitable even if there were a no vote on Sunday and the current £1.1bn loan repayment could be covered by using the £1.3bn Greece was owed from ECB profits last year.

Meanwhile, British holidaymakers have been warned by the Foreign Office to take enough euros to cover emergencies as they could face problems using credit cards or cash machines. It is estimated there are about 110,000 British holidaymakers in Greece at the moment.

Cash withdrawals are currently limited to £42 per day and the Athens stock exchange is also closed as part of the emergency measures.

Many Greeks say the situation is “unbearable” and that they have had to resort to bartering with neighbours as they have no money left.

“We can’t take any more of this, so we have to keep saying no to the EU masters,” said Athens resident Ilia Iatrou. “The EU can’t afford to let us fail so we should continue to say no and they will blink and give us a better deal.”

IF Greece does default on its debt today it does not mean automatic expulsion from the European Union, according to ECB vice-president Vitor Constancio.

However, the bank’s refusal to increase the emergency cash fund for the Greek banks means a Grexit is more likely, as one of the main stipulations of the single currency is that there is a free flow of credit.

“If there is no deal, Grexit is inevitable – there has to be a deal,” said Professor Dimitrios Kousenidis of Aristotle University of Thessaloniki.

Even if Greece does pay up today, it has another debt repayment due to ECB in late July of about £3bn. If Greece defaults on that it is unlikely the Greek banks will be propped up any longer by the Frankfurt-based bank.

Forced to leave the Eurozone, Greece would have to return to the drachma and would be hit by instant inflation and devaluation that would strike the economy hard at least in the short-term, although in the long-term some economists believe Greece would eventually be better off.

If there is a Grexit, there would be a fear of contagion and other debt-ridden countries following Greece’s example.

For this reason alone, European leaders are likely to work hard to come to some sort of deal with Greece to prevent a messy default meaning a huge loss for the ECB, which has already loaned €118bn to the Greek banks and has also bought €20bn worth of Greek government bonds.

Poll question revealed

THE Greek Government has published the text of the question it plans to put to citizens in a referendum on Sunday, asking them to decide whether or not to accept the demands made by international lenders in return for fresh cash to keep Greece from defaulting on its debts.

The referendum poses a simple question: “Should the proposal that was submitted by the European Commission, the European Central Bank and the International Monetary Fund at the Eurogroup of June 25, 2015, which consists of two parts that together constitute their comprehensive proposal, be accepted?”

The "no" box appears as the first option. The government, which rejected the proposal in negotiations as contrary to its electoral pledges, has urged Greeks to vote no.