Kathleen R. McNamara writes: The European Union appears to be on the brink of an unprecedented rupture. After months of meetings between the 19 E.U. states that use the euro, Greece broke off talks ahead of a June 30 deadline for continued financing of their vast debts and is likely to default and leave the euro.
Negotiations have dragged on for months. Facing harsh demands from Greece’s E.U. and IMF creditors for deep cuts in public spending and increased taxes, Prime Minister Alexis Tspiras abruptly announced on Friday that instead of continuing the talks, he would put the “humiliating” and “unbearable” bailout terms to a nationwide referendum on July 5. Critical stopgap financing from the European Central Bank (ECB) is also in jeopardy, and even if the referendum were to pass, it would be moot given the June 30 expiration of the credit line. Greeks prepared for the banks to be closed this coming week and capital controls instituted.
After 16 years of expanding membership, the euro zone now faces the real possibility that one of its core members, Greece, may spiral out of the currency and into economic chaos. [Continue reading…]