By Nektaria Stamouli in Athens and Bertrand Benoit and Andrea Thomas in Berlin
Officials were battling it out for the minds of Greek voters on
Thursday ahead of a critical vote on its creditors' demands that
could decide whether the country leaves the euro or buckles down
for further difficult negotiations.
The referendum called for Sunday is splitting voters and
spreading dissent inside the Greek government as the country faces
a potentially devastating bankruptcy. Eurozone finance ministers
say there will be no further talks until after the vote--and even
if Greeks vote "yes," that could be long and painful.
Complicating the picture, the International Monetary Fund warned
in a review that Greece needs a comprehensive debt restructuring by
the eurozone and additional bailout cash totaling above EUR60
billion through 2018 to return the country back to health--making
clear the economic situation is worse than many voters are
aware.
Crucially, a shorter version of the debt review, leaving out
some of the IMF's bleaker predictions, is one of the two documents
that Greeks are voting on in Sunday's referendum
The IMF report is also a sign to the Greeks that they won't get
easier terms and to the Europeans that there are more political
battles ahead. The IMF warns that easing the budget cuts and policy
overhauls demanded by creditors even further would require the
eurozone to write off around EUR50 billion of the loans they have
already given to Athens. That's something eurozone politicians have
ruled out.
Greek Prime Minister Alexis Tsipras has insisted that voter
rejection of creditor demands would give him more leverage in
negotiations and that the standoff could be quickly resolved.
"The day after the referendum we will be united in the country's
efforts to overcome this economic crisis," Mr. Tsipras said
Thursday during a visit to the defense ministry before the IMF
report was released.
But a German government official warned Greece would face long
and hard negotiations over a fresh bailout even if voters rejected
their government's tough line.
Negotiators are unlikely to be able to put Greece under a new
financial safety net by July 20, when it must repay more than EUR3
billion in bonds held by the European Central Bank or face a second
multi-billion default on its debt within 20 days. Greece became the
first developed country to default on the IMF after it missed a
$1.73 billion rescue-program payment the same day.
"We have to dispel this view that there can be an agreement next
Wednesday," the government official said. "Even with the best will
in the world, it will be a long and difficult process."
Berlin argues that Greece's default to the IMF and the rapid
deterioration of the its economy and its public finances have
shifted the basis for negotiations, making an agreement unlikely
until well into the summer, if it can be reached at all.
One complication is the economic and fiscal impact on Greece of
the five-month standoff, built-up domestic arrears and its closure
of banks this week in the face of a surge of withdrawals
The collapse of trust between Greek negotiators and its
creditors--mainly other eurozone members, the IMF, and the European
Central Bank--in the past weeks will complicate matters
further.
Gunther Kirchbaum, a lawmaker for German Chancellor Angela
Merkel's Christian Democratic Union and head of parliament's
European Union Affairs Committee, went further on Thursday, saying
Greece was not even eligible for a fresh bailout, which Athens
requested on Tuesday.
In order to qualify for aid under the rules of eurozone's
bailout fund for states, Greece would need to show that its debt is
sustainable and that it only faces a liquidity crunch. In addition,
failure to secure such aid would have to pose a danger for the
financial stability of the entire eurozone.
Mr. Kirchbaum said Greece satisfied none of these conditions
since it had already defaulted to the IMF and given the fact that
most economists expected the ECB's bond-buying program to insulate
other eurozone members from the fallout of further defaults.
While several lawmakers said they shared Mr. Kirchbaum's views,
others called his argument premature, saying they expected
protracted negotiations on a new bailout to start next week,
especially if Greek voters backed the creditors.
Under the German law that governs the country's participation in
European bailouts, the government needs parliamentary approval both
to start and conclude negotiations over a bailout, giving German
lawmakers a double veto on any rescue deal.
In Greece, President Prokopis Pavlopoulos argued that the
country's only option is Europe and the eurozone. "The referendum
serves democracy only if it is taking place under conditions that
don't allow division," Mr. Pavlopoulos said during a meeting with
the president of the National Bank.
While in parliament, Mr. Pavlopoulos had supported the austerity
measures Greece undertook in exchange for a EUR245 billion bailout
that expired on Tuesday. Two former Greek prime ministers, Costas
Karamanlis and Costas Simitis --who oversaw the country's entry
into the common currency--also threw their support behind the
vote.
And in a sign of the bubbling dissent in the ruling coalition,
five lawmakers in Syriza's junior coalition partner, Independent
Greeks, distanced themselves from the government position Thursday,
with some saying they intend to vote "yes" in the referendum, while
others called on the government to cancel it.
Jeroen Dijsselbloem, the Dutch finance minister who has presided
over talks with his eurozone counterparts, said a "no" vote would
not entail Greece automatically leaving the monetary union. But he
stressed it would be an illusion for voters to believe that by
voting "no" Greece would be in a position to negotiate a better
bailout package.
Still, Greek Finance Minister Yanis Varoufakis remained
optimistic that his country's voters would follow the government's
recommendation. "We are going to win on Sunday" he said Thursday,
speaking on Bloomberg TV.
"I am quite confident that the Greek people have had enough of
extending and pretending."
Archie van Riemsdijk in Amsterdam contributed to this
article.
Write to Nektaria Stamouli at nektaria.stamouli@wsj.com,
Bertrand Benoit at bertrand.benoit@wsj.com and Andrea Thomas at
andrea.thomas@wsj.com