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Stakes rise in Greece's bailout referendum

Marc Burleigh, with Alex Pigman in Brussels
Stakes rise in Greece's bailout referendum

Athens (AFP) - Greece's government and international creditors raised the stakes Thursday over a weekend referendum that could decide the nearly insolvent EU country's political and financial future.

The radical left government of Prime Minister Alexis Tsipras "may very well" resign if Greeks spurn its call to vote 'No' in Sunday's plebiscite, Finance Minister Yanis Varoufakis told Australian radio.

He added to Bloomberg TV that he himself would rather "cut my arm off" than stay on as minister in that case.

But Prime Minister Alexis Tsipras, in a later interview on Greek television, cast doubt on whether he would exit should 'Yes' prevail. He would respect the result but "remain the institutional guarantor of the constitution," he said.

Exasperated EU leaders warned the eurozone would be plunged into "unknown" territory if the Greek government got its way in the vote.

The International Monetary Fund (IMF) meanwhile highlighted the deteriorating situation in Greece by slashing the country's growth forecast this year from 2.5 percent to zero.

It also estimated Greece needs at least 50 billion more euros ($55 billion) to stabilise its finances over the coming three years, including 36 billion euros in new money from the EU.

- Demonstrations -

Accelerating austerity, closed banks this week and the prospect of crashing out of the eurozone -- and maybe even the European Union -- are taking their toll on Greece's population of 11 million.

"Now it's only the banks. But if there's a run on supermarkets, and fuel starts running out, it could lead to riots, to chaos, even to a coup by the sort of military junta which seized the country in 1967," said Georgiadis Aris, an Athens lawyer.

A brief scuffle between anti-government protesters and riot police broke out late Thursday on the margin of a demonstration of 6,000 people in the capital's central Syntagma square called by the communist party.

At the same time, a smaller rally of 1,200 people backing the government's 'No' stance gathered in front of the city's nearby university.

"There is no future for this country in the EU. Because of the austerity measures there is poverty, people dying in the street, committing suicide," said one 26-year-old woman taking part, Marta.

Duelling 'Yes' and 'No' demonstrations have been called for Friday.

- Divided -

In obfuscatory language, the plebiscite asks whether Greeks are willing to swallow yet more austerity in return for a bailout that expired just days ago.

But EU leaders have framed the vote as a consultation on whether Greeks want to stay in the euro or not.

Tsipras, in his interview on Greek channel ANT1, insisted the referendum was an exercise in democracy and would have no effect on Greece's eurozone membership, which is designed to be irreversible.

He believes a 'No' vote would bolster his hand in bailout negotiations which would happen "within 48 hours" of the referendum outcome.

French President Francois Hollande said however, on an African visit, that a 'No' could send the eurozone "into the unknown".

The head of the Eurogroup of finance ministers, Jeroen Dijsselbloem, also said: "In case of a 'No', Greece's situation will become exceptionally difficult."

Voter surveys have given no reliable indication of how the plebiscite will play out. One poll leaked to Greek media Thursday put the 'No' camp at 43 percent, and the 'Yes' leading with 47 percent.

There is also a chance the referendum may yet to cancelled or suspended: Greece's top administrative court, the Council of State, is to rule Friday on its legality.

- 'End of the line'? -

The world's financial markets and Greece's creditors -- the European Commission, European Central Bank (ECB) and IMF -- have all largely stepped back to watch the outcome.

Even its default this week on 1.5 billion euros ($1.7 billion) owed to the IMF -- becoming the first developed country to fall into arrears with the institution -- did not spook markets outside of Greece as much as many had feared.

"Greece may be out of the spotlight for the time being, but it should not be forgotten, and this weekend could be the end of the line for Greece and the euro," said David Madden, market analyst at IG trading group.

But other analysts, including Carsten Brzeski, chief economist at ING-DiBa bank, said the eurozone would likely not let Greece fall even in the event of a 'No' vote.

"The inconvenient truth on the Greek referendum is that neither a 'Yes' nor a 'No' vote will quickly lead to a solution," he wrote.

An investor report put out by Deutsche Bank agreed, and said: "Ultimately, the continued strong pressure on the Greek economy and the government's weak cash position will remain important catalysts for future developments, irrespective of this weekend's referendum."