Germany dismisses Greece bid for bailout after 'No' vote

6th July 2015, Comments 0 comments

Germany on Monday dismissed Greece's bid to swiftly seal a 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, a firebrand who had infuriated European counterparts, announced he was resigning at Prime Minister Alexis Tsipras's request in a move to placate creditors.

He was replaced by Euclid Tsakalotos, a much more discreet and calm junior foreign minister and economist who had been Greece's pointman in the negotiations with creditors.

Varoufakis's 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 there was 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."

A Greek government source said Tsipras and Merkel had spoken by phone and agreed Athens' proposals would be presented at a hastily-called eurozone summit on Tuesday.

- 'Ready to assist' -

Berlin's reluctance to reopen talks underlined a divide within Europe over the Greek crisis, with France, Italy and Spain adopting a more conciliatory tone.

That gap and the direction to take were likely to be discussed in a Paris meeting late Monday between Merkel and French President Francois Hollande.

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

And although last week Greece defaulted on a 1.5 billion euro repayment to the IMF, effectively cutting it off from further financial assistance from the fund, IMF chief Christine Lagarde said it was "monitoring the situation" and stood "ready to assist Greece if requested to do so".

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

After jubilant celebrations by 'No' voters following their 61-percent referendum victory, Greeks returned to the reality of closed banks and queuing at ATMs for their daily withdrawal limit of 60 euros.

Fears were growing that the cash machines could soon run out despite government-enforced caps on withdrawals, and emergency funding was urgently needed from the European Central Bank (ECB) to stave off economic collapse.

Greek banks were to remain closed until Wednesday, Greece's state news agency reported, citing officials.

"I'm very afraid we will get no cash anymore in the coming days. They really have to fix it, end of this week at the latest, otherwise it (the economy) is 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."

Despite its hardline approach to debt talks, Germany said eurozone leaders should discuss humanitarian aid for the austerity-fatigued country with widespread poverty and high unemployment.

"The people there need help and we should not refuse it just because we're unhappy with the result of the referendum," German Economy Minister Sigmar Gabriel said.

Market reactions to the referendum were mostly muted, suggesting limited contagion from a possible "Grexit", or Greece's exit from the eurozone.

- 'Greece in limbo' -

European figures emphasised that a euro firewall was strong enough to contain jitters from Greece.

"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 also took place 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."

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.

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

The last EU-IMF bailout for Greece expired last Tuesday, 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.

© 2015 AFP

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