It was a small room with a plain wooden table. The Greek Prime Minister Alexis Tsipras sat on one side, along with a translator and Angela Merkel, the German Chancellor. On the other sat President Francois Hollande of France; around were a handful of officials.

In this modest Brussels setting last Friday morning, key players in the great Greek debt drama tried to avert a meltdown that could threaten the future of the euro and even the European Union . Merkel and Hollande made a final offer of billions of euros in aid for bankrupt Greece – if Tsipras would sign up to economic reforms demanded by his country’s creditors.

The participants looked tired, their body language was stiff. The meeting did not last long. Tsipras, according to Greek officials, had already decided to call an emergency meeting of his Cabinet in Athens for that evening. Even as he spoke with Merkel and Hollande, he was preparing to hand the decision over Greece’s fate to the nation’s voters. The day before he had decided, after months of talks, that he and Greece’s creditors were unable to agree a deal.

The Greek problem cuts to the heart of Europe’s future

As he flew home to Athens later that day, the young leader settled on the idea of a referendum, according to the Greek officials. Staging a full-scale election would take too long. But a referendum could express the will of the Greek people.

He informed ministers of his plan, the Cabinet approved it and he announced the referendum in a late night TV broadcast. The abruptness of the move took some European leaders by surprise. Merkel and Hollande were told of it by telephone shortly before Tsipras announced it.

The bombshell said much about the long-running struggle between wayward Greece and the megalithic EU. At stake is far more than money. The Greek problem cuts to the heart of Europe’s future. In Tsipras’ eyes it is a crisis of democracy and sovereignty, of whether the wishes of a nation state outweigh the aims of the supra-national eurozone and EU.

For the eurozone – and Germany in particular – it is a test of unity, of whether countries within the single currency bloc that fail to meet its economic standards and agreed rules can be brought into line, or not.

Tsipras’ call for a referendum infuriated finance ministers from the eurozone. They and the International Monetary Fund (IMF) had rescued Greece from its mountainous debts with massive bailout programmes; the latest was due to end on June 30, when Greece also had to pay €1.6 billion to the IMF.

Patience exhausted, the Eurogroup decided last weekend to let the bailout programme expire as scheduled. The European Central Bank (ECB), which was keeping Greek banks afloat with €89 billion of emergency funding, also decided enough was enough: it said it would give no further emergency funding. In Greece citizens queued to take cash out of ATMs. Tsipras and his government ordered Greek banks to stay shut and imposed capital controls to stop funds leaving the country. On Tuesday, Greece failed to make its payment to the IMF. Yesterday dawned with Greece adrift – with no recourse to further funding from the IMF or the bailout programme.

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