Germany dismisses Greece bid for new bailout after ‘No’ vote

July 6, 2015 3:17 pm
Newspapers at a kiosk in Thessaloniki splash on July 6, 2015 with the results of Greece's referendum, in which more than 61 percent of voters rejected fresh austerity demands by international creditors  © AFP
Newspapers at a kiosk in Thessaloniki splash on July 6, 2015 with the results of Greece’s referendum, in which more than 61 percent of voters rejected fresh austerity demands by international creditors

, ATHENS, Jul 6 – Germany on Monday dismissed Greece’s bid to clinch a quick new debt deal after the country delivered a resounding ‘No’ to more austerity, appearing little moved by the surprise resignation of the Greek finance minister.

Yanis Varoufakis, who had grated his European counterparts with his blunt negotiating style, announced he was resigning at Prime Minister Alexis Tsipras’s request in a move to placate creditors.

His departure came a day after Greek voters overwhelmingly rejected more austerity required by international creditors under a bailout deal, heightening fears of a “Grexit”.

But Berlin said the departure of Varoufakis did not change anything.

“It is not about people but rather positions,” Chancellor Angela Merkel’s spokesman Steffen Seibert said, adding that there is currently “no basis to enter into negotiations on a new aid programme”.

“It is up to Greece” if it wants to stay in the eurozone, he said. “We are waiting to see which proposals the Greek government makes to its European partners.”

The firm rebuff from Berlin underlined a sharp divide within Europe over the Greek crisis, with France, Italy and Spain adopting a more conciliatory tone.

Italian Prime Minister Matteo Renzi said on his Facebook page that Europe needs to “talk not only about austerity and balance sheets but about growth, infrastructure”, while Spain said it was open new negotiations for a new Greek bailout.

Merkel and French President Francois Hollande’s meeting in Paris later Monday could set the tone a hastily called eurozone summit a day later which is due to examine the impact of Sunday’s referendum.

As eurozone leaders weighed the cost of the vote, Tsipras also spoke to Russian President Vladimir Putin in a telephone call as Athens scrambled to restore liquidity to its battered banking system.

– Fear of ATMs running dry –

After jubilant celebrations through the night by ‘No’ voters after their 61 percent referendum victory, Greeks returned to the reality of queuing at ATMs for their daily withdrawal limit of 60 euros.

Fears were growing that the cash machines could soon run out, despite the limits on withdrawals imposed under capital controls over a week ago to stem a bank run.

“I’m very afraid we will get no cash any more in the coming days. They really have to fix it, end of this week at the latest, otherwise it’s collapsing,” pharmacist Lambros Vritios said in reference to the banking system.

Vritios said he had been to several ATMs but found them empty. “It’s really crushing me.”

Emergency funding was urgently needed from the European Central Bank, which is meeting Monday, to stave off economic collapse.

Market reactions to the referendum were however mostly muted, suggesting limited contagion from a possible “Grexit”, or Greece’s exit from the eurozone.

The euro, which had tumbled as much as 1.6 percent immediately after the ‘No’ vote, recovered after Varoufakis’s resignation to just 0.25 percent lower.

But the German rejection of Greece’s demands sent it back down again to $1.1030, 0.76 percent off.

– ‘A Pyrrhic ‘No’? –

Ahead of the eurozone summit, Europe scrambled to calm fears that the ‘No’ vote could end up splitting the bloc.

“The stability of the euro area is not in question,” European Commission vice president Valdis Dombrovskis told a press briefing. “We have everything we need to manage the situation.

A flurry of meetings were also being held Monday, with German and French finance ministers holding talks in Warsaw, while the Euro Working Group of top treasury officials was to meet in Brussels.

More than three quarters of Greeks want to stay in the eurozone, according to surveys. But analysts are now putting the chances of a Grexit at “very high”.

“Did Tsipras celebrate a Pyrrhic ‘No’?” asked Carsten Brzeski, chief economist at ING-DiBa bank.

“Lots of bad blood is on the floors, Greek banks are closed and Greece does not have a bailout programme,” he noted.

Holger Schmieding, analyst at Berenberg bank, also warned that the change in finance minister may be “more symbolic than a change of substance” as Varoufakis has not been leading the negotiations since April.

“Greece is in limbo until further notice, sliding towards Grexit unless Athens changes course,” he said.

– Massive debt –

Tsipras, 40, insists that instead of Grexit, the creditors will now finally have to talk about restructuring the massive 240-billion-euro ($267 billion) debt Greece owes them.

Last Tuesday, his country defaulted on a 1.5-billion-euro repayment to the IMF, becoming the first developed country to fall into arrears to the institution.

That same day, the last EU-IMF bailout for Greece ran out, despite Tsipras’s appeals for it to be extended.

Greece was officially declared in default on Friday by the European Financial Stability Facility, which holds 144.6 billion euros ($160 billion) of Greek loans.


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