Europe shrugs its shoulders

Reactions to Greece’s pending referendum over its euro membership ranged from dismay to calm Monday, as EU officials implored Greeks to reaffirm their commitment to Europe and national leaders led by Angela Merkel cautioned against trying to influence the outcome.

The weekend announcement of the July 5 vote caused Greece’s long-running aid talks to collapse, casting doubt on the country’s membership in the euro. But fears of a broader panic in financial markets proved unfounded.

European stock indexes posted steep declines and the bonds of Italy, Spain and Portugal took a hit, but the reaction was far from the calamity some feared. The euro, the main focus of attention, even rose on the day.

The muted reaction is unwelcome news to Greece’s leftist leaders, who have tried to use the specter of financial market chaos to their advantage in negotiations. If anything, Monday’s market response suggested the measures Europe has put in place in recent years, which include a hefty bailout fund and European Central Bank intervention in debt markets, are working.

Against that backdrop, Merkel ended her silence on the events of the weekend. She repeated that “if the euro fails, Europe fails,” a line she first used a couple of years ago. But she also suggested that a Greek departure from the euro no longer threatened to bring the currency down.

“We can see today that Europe can react much forcefully than was the case five years ago,” she said.

Speaking in Berlin, Merkel placed the blame for the failed talks squarely at the feet of Greece’s leftist government, saying it had left the talks midstream, showing “no willingness to compromise.”

“Europe only functions when there’s compromise,” she said. “No one gets 100 percent.”

She stressed that it was up to the Greek people to determine the next steps and that while Germany stood ready to help Greece, it wouldn’t interfere in its decisions.

In a stark contrast to Merkel’s measured tones, European Commission President Jean-Claude Juncker went on the attack.

Juncker’s decision to go on the offensive suggests he sees no hope of resolving the crisis with the Tsipras government.

Juncker made a dramatic appeal to Greeks to support Europe’s reform blueprint for their country, accusing the leftist government in Athens of lying to the public about the proposals and of protecting special interests.

Clearly agitated by events of the recent days, Juncker said Greek Prime Minister Alexis Tsipras’ decision to call a referendum ahead of a crucial round of talks planned for Saturday amounted to a “betrayal.”

Juncker said he was not informed of the move ahead of time, despite having spent “20 hours” negotiating with Tsipras up until Friday.

“In one night, the euro suffered a major blow and good will was thrown to the wind,” a visibly emotional Juncker told reporters in Brussels. “It’s not a game of bluff. There are not winners or losers. Either we are all winners or we are all losers.”

On Greek television, Tsipras continued his criticism of his nation’s creditors. “We urge them not to kill democracy in its birthplace and to be realistic,” Tsipras said. “Each time we tried to compromise they went even further.”

Juncker’s decision to go on the offensive suggests he sees no hope of resolving the crisis with the Tsipras government. Instead, he is counting on Greeks themselves to vote to support Europe’s reform plan in the July 5 referendum, a result that would likely force Tsipras and his Syriza movement from power. Tsipras seemed to hint as much in his comments late Monday.

In contrast to Merkel, who appeared sanguine about Greece’s future in Europe, Juncker insisted that everything must be undertaken to keep the country in. Their contrasting styles reflect their divergent political priorities, with Merkel stressing Germany’s national interests and Juncker European solidarity.

As if to underline the difference, Merkel, at one point in her short press conference, reassured Germans that a Greek default wouldn’t scupper the government’s plans to balance the budget in the coming years.

Switching between French, English and German, Juncker spoke for about 45 minutes against a backdrop of European Union and Greek flags in the Commission’s drab press center. In his opening remarks, he referred to Greece as “Plato,” saying it was impossible to imagine a European Union without it.

“I will never let the Greek people go down and I know that the Greek people don’t want to let down the European Union,” he said. “Greece is a member of the European family.”

European Parliament President Martin Schulz echoed that call later in the day, announcing that he would travel to Greece to rally support for the country’s continued membership in the euro.

“I will fight to convince Greek people to take that stretched hand and stay in the eurozone,” Schulz said.

The tone of Juncker’s remarks alternated between consoling words of solidarity with the Greek people and anger at their government, which he said had misled them.

Juncker accused Tsipras of withholding key information about the creditor proposals and implied that the Greek leadership was protecting ship-owners and other special interests by resisting pressure to raise their taxes. He challenged the government “to tell their people what is really at stake.”

Analysts said Juncker was using a narrow definition of pension cuts, and that there would in fact be cuts.

In the talks, Juncker said, it was the European institutions and not the Greek government that were trying to limit the social impact of the reforms. He insisted that their proposal, which the Commission published Sunday, would cut neither wages nor pensions as the Greek government has maintained.

“There are no pension cuts in this package,” he said. “In fact, it’s a package which creates more social fairness, more growth and a more modern and transparent public administration.”

But some analysts said Juncker was using a narrow definition and that there would in fact be cuts.

“Technically speaking there are pension cuts,” said Wolfango Piccoli, the managing director of Teneo Intelligence. “You can read the document in different ways.”

Even so, Juncker said both he and Eurogroup chief Jeroen Dijsselbloem were willing to make a major concession to Greece on debt relief, one of Tsipras’ core demands.

If true, Tsipras’ sudden decision to end talks before the deadline will feed speculation that his strategy all along has been to lead Greece out of the euro. 

“I tried everything and they know it,” Juncker said of Greece’s leaders.