On heels of ‘No’ vote, Greece looks to reopen bailout talks

World Today

Greece BailoutYoung girls wave Greek flags as supporters of the No vote react after the first results of the referendum at Syntagma square in Athens, Sunday, July 5, 2015. (AP Photo/Petros Giannakouris)

While Greeks were hopeful on Monday to see banks reopening after they voted resoundingly to back the government in rejecting the austerity terms of a bailout, fears grew that Greece could be heading back to the drachma, throwing its eurozone membership into further doubt.

If the ‘No’ in Sunday’s referendum eventually takes Greece out of Europe’s single currency, any “new drachma” or temporary payment unit could be worth as little as a fifth of the euro now in circulation.

Read our continuing Greece economy coverage here

Some said they were pleased with the ‘No’ referendum result which they said was a strong message to the eurozone that Greece would stand firm against tough bailout conditions.

Others felt it was the biggest mistake the country, and the Syriza government who was voted in on an anti-austerity manifesto, had ever made.

Greece’s defense minister said three opposition parties have signed a declaration backing Prime Minister Alexis Tsipras in bailout negotiations with creditors.

That makes a total of five parties behind the prime minister, who already had the support of his own Syriza party and the junior party in the governing coalition, the Independent Greeks.

Defense Minister Panos Kammenos said the support heralded a “new era” in Greek politics and would boost Athens’ chances of reaching a deal with European and international creditors.

Tsipras convened a meeting of party leaders on Monday, a day after winning a bailout referendum that rejected creditors’ previous demands and hours after his finance minister, Yanis Varoufakis, resigned.

With banks shuttered, cash machines running out of banknotes and sympathy for Athens among EU governments close to exhausted, Greece’s fate is largely in the hands of Merkel and the European Central Bank.

Asked about a realistic chance for the banks to re-open within the 48 hours following the referendum, political risk expert Wolfgang Piccoli, said it is a very unlikely scenario.

“It is certainly misleading when they are saying they are going to reach a deal within the next 48 hours and banks will be open tomorrow. None of the two is going to happen,” he said.

“The banks will be closed tomorrow and, by the end of tomorrow, they are going to be out of money in the ATM machines. Unclear whether they can reopen on Wednesday at this point and certainly no deal within 48 hours. It could take weeks to reach a deal,” Piccoli added.

Greek bankers were expected to meet the central bank later on Monday, banking sources said, amid expectations that the government will have to issue a new decree extending the crippling closure of banks beyond Tuesday.

After five years of economic crisis and mass unemployment, Greek electors voted 61.3 percent ‘No’ to the bailout conditions rejected by their radical leftist government, casting Greece into the unknown.

Tsipras is due to meet European leaders on Tuesday in Brussels, with the results of the referendum in his pocket and after the resignation of his finance minister Yanis Varoufakis who stepped down on Monday morning.

Varoufakis, whose forceful denunciations of creditors alienated many of his eurozone colleagues, left the job saying Tsipras believed it would help smooth the path to a new aid deal.

“The referendum result was to be expected. We all wanted it. The institutions must get the message. I don’t agree with Mr. Varoufakis’ resignation. He did it to help the government but he was the best thing for Greece. I don’t agree with resignations. As regards Europe, it must get the message and understand that Greece has had enough of austerity, it’s not right,” said Savvas Konstantinidis, a 62-year old resident.

“The finance minister would have been sacked, either way. They are all acting. Nobody cares about the Greek people. Tsipras lies. He is deceiving the people. His ‘No’ has sunk Greece. He destroyed everything. Greece is finished,” said Nikos, another resident of Athens.

“I hope not only that there will not be a third bailout but also that we will also get out of the euro and of the European Union,” said Panagiotis, 49.

The editorial in the centre right newspaper Ethnos questioned Prime Minister Alexis Tsipras’ ability to negotiate a bailout agreement with the international lenders within 48 hours, as promised by Varoufakis. “Tsipras plan after 61.3 percent earthquake” read the headline.

“Europe! Can you hear us?” was the headline for Democratia daily and “Reforms or Grexit. A summit of agony in Brussels setting the real dilemma,” for Ta Nea which also carried a cartoon of a man getting lost in a box full of referendum ballots, looking for hope.

The resignation of the outspoken finance minister removed a major obstacle to any deal to keep Athens in the euro zone after the vote to back the government and reject the austerity terms of a bailout.

A government official said the mild mannered chief negotiator in the bailout talks, Euclid Tsakalotos, was the front runner to step into Varoufakis’ shoes.

Varoufakis’ successor was due to be named after a meeting of political leaders that got under way at 10 a.m. (0700 GMT).

With banks shuttered, cash machines running out of banknotes and sympathy for Athens among EU governments close to exhausted, Greece’s fate is largely in the hands of the European Central Bank and of German Chancellor Angela Merkel.

The ECB’s policymaking governing council was holding a conference call on Monday to decide how long to go on keeping Greek banks afloat after the overwhelming rejection of bailout terms the central bank had helped to shape.

Varoufakis announced his resignation on his blog.

In an entry entitled, “Minister no more,” he said he was “made aware of a certain preference by some Eurogroup participants, and assorted ‘partners’,” for his “…’absence’ from its meetings; an idea that the Prime Minister judged to be potentially helpful to him in reaching an agreement”.

“I shall wear the creditors’ loathing with pride,” was his Parthian shot toward those he had been negotiating with.

In the absence of a flow of new euros from the European Central Bank after a “Grexit”, Athens’ existing stock of hard currency is not expected to be enough to cover the government’s obligations.

Currency experts say that would probably force the state to print some form of interim IOUs or “scrip” to pay wages and pensions and the purchasing power of this on the street or overseas would be a direct proxy for a new currency.

Compiled from Reuters wire reports