By Marcus Walker and Nektaria Stamouli
ATHENS--Greek leader Alexis Tsipras pursued both compromise and
confrontation with his country's creditors on Wednesday while his
government's rival factions fought over how, and whether, to keep
Greece in the euro.
The embattled prime minister lambasted Greece's lenders--the
German-led eurozone and the International Monetary Fund--in a
televised speech after Europe rejected another last-ditch bailout
proposal from Athens as too little, too late. He called on Greeks
to vote "no" on Sunday in a referendum on creditors' demands,
arguing that a popular rebuke to lenders would be "a decisive step
for a better agreement" that "does not mean a rupture with
Europe."
Yet fear and divisions are spreading inside Greece's government
as the country teeters on the brink of bankruptcy, officials say.
Moderate ministers and advisers who want the premier to accept
Europe's bailout terms are increasingly panicking about the
premier's erratic course, recognizing--despite Mr. Tsipras's claim
on television--that a popular "no" vote is likely to lead to exit
from the euro, while a "yes" would probably bring down the
government.
Advocates of tough tactics toward the country's creditors, led
by Finance Minister Yanis Varoufakis, are pushing the premier to
hold his line, arguing that Europe will in the end offer Greece
more-lenient financing terms rather than fracture the eurozone.
Hard-line leftists in the ruling Syriza party are hoping for a "no"
vote in the belief that a euro exit would be better than
surrendering to Germany's and the IMF's market-oriented policy
demands.
Conflicting opinion polls suggest Greek voters are equally
divided. In a poll of 1,000 people published Wednesday and
conducted for French bank BNP Paribas, 47.1% said they planned to
vote "yes" or were likely to. An additional 43.2% said they would
vote against accepting the bailout terms Greece's creditors are
demanding, or leaning toward a "no" vote.
Another poll, also published Wednesday but for a left-wing Greek
newspaper, put the "no" votes clearly ahead--but with a smaller
lead since Monday when banks remained shut, spooking many Greeks.
Of those surveyed after Greece imposed capital controls, 47% said
they would vote "no," compared with 37% who backed a "yes" vote,
according to pollster ProRata, which conducted the survey on Sunday
through Tuesday.
Support for the "no" vote had been much higher, at 57%, among
those polled by ProRata on Sunday, before the controls went into
effect. Polls in recent years have shown that Greeks strongly
support the euro but oppose further austerity demanded by
creditors.
The behind-the-scenes arguments within Greece's government,
elected only in January on a tricky platform of challenging
Europe's demands for fiscal austerity while keeping Greece in the
euro, are symptoms of the anxiety gripping the country ahead of
Sunday's referendum.
The crisis has come to pervade every facet of Greek life since
Mr. Tsipras called the vote over the weekend: Across the country,
long lines of people wait at banks and supermarkets, families are
glued to the TV news, and heated arguments break out on the streets
about whom to blame for the mess.
A flood of deposit withdrawals forced Greece to shut its banks
this week, casting a chill over the long-suffering economy. With
Greece starting to default on its foreign debts and no European
bailout program in place since Wednesday, many here fear the worst
is yet to come.
"We've been in business for 41 years, and it's never been so
bad," said Antonis Tartaras, owner of an eyewear boutique in
downtown Athens. "God help us all."
Wednesday brought fresh twists in a Greek debt drama that has
run for nearly six years, but which is now in a decisive phase. Mr.
Tsipras pitched a compromise to Europe to prolong Greece's bailout,
promising in a letter to European officials to accept most, but not
all, of the fiscal belt-tightening measure that lenders were
insisting upon in negotiations last week. Mr. Tsipras ended those
talks in Brussels on Friday night by opting for a referendum on the
list of economic measures that European authorities and the IMF
were demanding.
On Wednesday, European officials dismissed the compromise bid
from Athens as insufficient to revive negotiations. Eurozone
finance ministers agreed on a conference call late Wednesday that
there would be no further bailout talks with Greece until after its
Sunday referendum.
The response to Mr. Tsipras's latest letter was particularly
frosty in Berlin, where German Chancellor Angela Merkel and others
said there is nothing to discuss with Mr. Tsipras until after
Greece's referendum.
Ms. Merkel told Germany's parliament, the Bundestag, on
Wednesday, that she remains willing to talk to Greece about
financial aid after the vote, but only in exchange for tough
economic reforms. She signaled that she is prepared to let Greece
leave the euro if it doesn't accept the IMF-European overhauls.
"A good European is not one who seeks agreement at any price,"
Ms. Merkel said, in a swipe at some European Union officials'
attempts to broker peace with Greece on more lenient terms.
Other German officials have said privately in recent days that
it is becoming increasingly hard for Berlin to accept Mr. Tsipras
as a reliable partner in a bailout deal, now that he has chosen to
lead a referendum campaign against the creditors.
Mr. Tsipras's fiery rhetoric in his televised speech on
Wednesday did nothing to dispel the mistrust. The leftist premier
said that Greeks who vote "yes" to Europe's economic demands would
be "accomplices" to austerity. He accused the rest of the eurozone
of trying to blackmail Greece and scare its voters into accepting a
bad deal. He also attacked the European Central Bank for curbing
emergency liquidity for Greek banks, thus forcing their
closure.
"The prevalence of extreme conservative circles led to the
country's banks suffocating, with the aim of passing the blackmail
from the government to each citizen individually," he said.
The Greek leader's oscillation between populist rhetoric and
compromise offers has confused and angered European authorities all
year, alienating many policy makers who were initially sympathetic
to Syriza's core argument: that Greece's bailout program since 2010
has been unworkably harsh, leaving the country's economy and
society gasping after an overdose of spending cuts and tax
increases while denying it relief from unpayable debts.
Athens's erratic diplomacy reflects both the Syriza-led
government's inexperience and its internal divisions, Greek
officials concede.
Part of the government, led by Deputy Prime Minister Yannis
Dragasakis, has long pressed Mr. Tsipras to sign a deal with
creditors quickly, to protect a battered economy from further
damage. Mr. Dragasakis suggested late Tuesday that Mr. Tsipras
might want to cancel the referendum, or shift his support to a
"yes" vote to creditors' terms, if it helped to secure a deal.
On Wednesday, hard-line Greek officials gained the upper hand in
Athens again after Berlin dismissed Mr. Tsipras's letter. Mr.
Varoufakis, the Greek finance chief, advised Mr. Tsipras to stick
to his referendum and call for a "no" vote.
"The future demands a proud Greece within the eurozone and at
the heart of Europe," Mr. Varoufakis wrote on his blog. "This
future demands that Greeks say a big 'NO' on Sunday."
Greek officials who are critical of Mr. Varoufakis's strategy
worry that Germany and other lenders would simply write Greece off
after a "no" victory, forcing Athens to print its own money to
reanimate its banks and economy.
Mr. Tsipras has hinted publicly that he would step down if
Greeks vote "yes" to creditors' terms against his loud appeals.
Some Greek officials say an interim government led by technocrats
might succeed him and try to sign a new bailout deal, before giving
way to elections in the fall. Other officials think Mr. Tsipras
could survive a "yes" vote and stay in power for a few months until
new elections.
Gabriele Steinhauser and Stelios Bouras contributed to this
article.
Write to Gabriele Steinhauser at gabriele.steinhauser@wsj.com
and Nektaria Stamouli at nektaria.stamouli@wsj.com