Sunday denouement for Greece: Exit mechanism being discussed

With the climax going on these days, Sunday is now seen as the denouement of a five-year battle to contain Greece’s debts, possibly splitting a currency that was meant to last and throwing more than half a century of European economic and political integration into reverse.

The EU has established a Sunday deadline to conclude a deal with Greece on a financial rescue in exchange for austerity measures and economic reforms.

However, Angela Merkel, the Chancellor of Germany - Greece’s largest foreign creditor - said she is “not especially optimistic” about finding a solution.

Today Greece's Prime Minister Alexis Tsipras was in Strasbourg as part of his last-ditch campaign to keep Greece in the euro, which he’s said is his highest priority.

His government is sending a formal request for a new bailout package to the European Stability Mechanism, the institution co-ordinating financial assistance to member states. Officials in the Eurogroup working group (EWG) are meeting to discuss the latest ideas from Athens.

Meanwhile the Guardian has reported that today’s meeting of eurozone finance ministers has been cancelled. A spokesman for Jeroen Dijsselbloem, the Dutch finance minister chairing the eurogroup, announced the conference call would not take place as planned.

Grexit formal mechanism

It is unclear what way Greece may exit the bloc, as the European law treats the euro project as irrevocable and makes no provision for a country to leave or be expelled.

The most possible exit mechanism would be for European governments to suspend the aid for Greece, pushing the ECB to stop supplying euros to the country’s lenders.

The ECB will end its support for the country if “there is no political accord in sight,” board member Christian Noyer said today.

In that occasion, Greece would have to issue IOUs or some other means of exchange, gradually leading to creating an alternative currency to replace euros.

Europe has “a Grexit scenario prepared in detail,” European Commission President Jean-Claude Juncker said yesterday, while Austrian Chancellor Werner Faymann commented that Greece’s Plan B is “another currency.”

Expert assessment of Greece's fresh reforms package would lead to a final set of meetings, culminating in summits of both euro-zone leaders and the broader 28-nation EU on Sunday.

At the summit, Greece's PM will have few sympathizers. Germany, the Netherlands and Finland have stuck to the tight-budget camp since the debt crisis broke out in 2010. Ireland and Portugal scraped through tough conditions to complete their own aid packages and would not like to see Greece escape easily.