European Union leaders are saying they want the new election in Greece scheduled for June 17th to be a referendum on whether the country will (a) remain part of the euro area, and (b) meet their conditions for EU support in that effort. All concerned will be lucky if the issue has not been resolved before then--by a disorderly Greek exit from the currency system, and what follows. This weekend may be the last chance to intervene to stop that disastrous outcome.
If I were Greek, I would have already turned my euro deposits into notes or deposits abroad. Once EU leaders started talking openly about the case for "amicable divorce"--what astonishing irresponsibility that was--the game was up. An incipient bank run gathered pace this week (more slowly than I would have expected, in fact). If that continues, and the ECB withholds unlimited support from the Greek financial system, the banks have to close and the economy will start to shut down. Without external financing, the government won't be able to pay its workers. Repudiation of debts, chaotic reintroduction of a national currency, and comprehensive economic breakdown will follow--with devastating consequences for Greece and unknowable repercussions for the rest of the euro area.