by Hugo Dixon
June 27, 2015
Alexis Tsipras has taken a massive gamble on Greece’s future. By calling a referendum on whether to accept the creditors’ latest offer of cash in return for unpopular reforms, the Greek prime minister is offering the people a choice between the bad and the extremely bad.
Meanwhile, the world may be about to face the biggest default in history. The euro zone will probably survive, but its rickety structure will be sorely tested.
Capital controls are likely before the Greek vote on the creditors’ terms is held on July 5. It’s not clear their offer will be on the table even if the people want it. If they don’t want it, a return to the drachma and more misery lie ahead. Tsipras is effectively calling for Greece to quit the euro.
Both Greece and its creditors, the euro zone countries and the International Monetary Fund, deserve blame for the breakdown in talks. But Tsipras mishandled negotiations particularly badly by taking an excessively confrontational approach.