Greece to hold referendum on bailout deal

The Greek Prime Minister Alexis Tsipras has just announced that there will be a referendum on the proposed bailout deal next Sunday, July 5^th. He will ask for the current bailout to be continued until then to allow the Greek people to have their say.

The signs from Athens are that Tsipras will campaign for a No vote unless the creditors offer Greece a radically better deal at tomorrow’s meeting.

This move from Tsipras will infuriate Greece’s creditors.  It will also, almost certainly lead to the introduction of capital controls for Greek banks until the referendum.

If the creditors don’t blink tomorrow and improve the terms they are offering Athens, then it is hard to see how the current deal can win a referendum in Greece. But if the Greeks do reject their creditor’s offer, then a default will be the only course left to them unless the creditors are prepared to restart negotiations, which is highly unlikely given the political mood in  Northern Europe.