Greek PM Alexis Tsipras has just called a referendum on 5 July. This after spending most of the week locked in discussions with creditors, in which no deal emerged. Here’s a quick recap — and why its likely Greece will vote no.

Last Sunday the Greek cabinet agreed the biggest ever compromise with lenders over short-term fiscal targets. Instead of trying to split the difference between 1bn and 2bn in 2015 they agreed to do 2bn austerity and more the next year. Their aim was to force the lenders to throw in debt relief, without which a short term budget deal is meaningless. Their argument to their own base was: this is redistributive austerity. On Monday, even as their own supporters reeled at the climbdown, President Hollande got behind the now €8bn austerity plan. But it quicly became clear the IMF would not sign it off. As I blogged, it was economically illiterate of the EU to agree to a massive tax hike in a depressed country, and so the IMF nixed it. From midweek onwards the IMF tried to reinsert minor details that would make it less redistributive — which the Greek government could not deliver. Even the Greek centre, called to Brussels to be moulded into an unelected government of national unity, expressed concern over it. By yesterday, what proved the clincher, the Greek side were saying: after all this, we get to the latest documents and we’re prepared to consider agreeing it with the institutions if they can give us something on debt relief — and then the Eurogroup signalled the deal was “too soft” and the voters of Finland, Germany etc would not accept it. So Tsipras has called the referendum on the Troika offer. This is the masterstroke he has been waiting to play. The question will be: will you sign up to the economically illiterate, forever indebted plan offered by the IMF/EU or give us a democratic mandate to resist it, even if they crash our banks. Whaterver you make of this logic sitting outside Greece, it is primed to deliver the no camp a victory. Even the word no has meaning. Oxi is a big act of resistance in Greece going back to the Italian occupation. Ne is not such a powerful word. Tsipras also had to deal with the social democratic wing of Syriza who wanted to sign a deal and stay in power at any cost. He has effectively put them back into a box: they were offered nothing to sell by the Troika in the end — the institutional deal was not backed by the Eurogroup. Where now? The ECB cannot pull ELA unless Greece is out of the programme. They will likely extend the programme to 5 July, but some will push to end it Monday. The Greek right on twitter is even now trying to spark a bank run. So the question is: does the referendum take place in an atmosphere of calm and democratic functioning, or is there chaos outside parliament enough for people to panic and vote Yes, even if there are enough mainstream parties prepared to vote yes? If Greece votes no to a quasi-Troika deal, the north European electorate are staring at the loss of €320bn taxpayers money, and the ECB will be seen as non-credible, and the IMF will have lost the biggest amount of money in its history. If the ECB pulls ELA early, I have no doubt Greece will immediately default on €27bn SMP bonds issued under Greek law. It may come down to: who has the biggest social power on the streets — the Greek left, inclduing the KKE, Syriza, the unions etc — or the right. Which is what Greek history has always tried not to ask since 1974.