6 July 2015

18.15 – Merkel and Hollande: Ball in Athens’ court (again)

As soon as it was clear which way the referendum was heading last night, German Chancellor Angela Merkel and French President Francois Hollande called a meeting to consult on the result. Though Italian PM Matteo Renzi might not have been too happy about being left out, there there is a limited amount that Merkel and Hollande can do tonight, however, until they hear what Athens comes back with. Making a short statement in Paris, both Merkel and Hollande repeated that “the door is still open.” Nonetheless, the top line remains what they’ve been saying all along – no solidarity without reforms. Now attention turns back to Greece as other Eurozone leaders expect new proposals from Alexis Tsipras tomorrow. So the ball is in Athen’s court – again.

17.57 – El Mundo Poll: 77%  of readers think Greece should leave the Eurozone

Spanish daily El Mundo has conducted an online poll amongst about 9,000 readers asking whether yesterday’s No vote means Greece should leave the Eurozone. A wide majority – 77% answered yes, only 23% said no. As we’ve written about previously, Spanish politics has been rocked by the popularity of the anti-austerity Podemos party, which will be watching what happens next with great interest. As we’ve also mentioned, the political contagion that may result from debt relief for Greece – or even a discussion about debt relief – may be a step too much for the Eurozone to stomach until after the Spanish elections later this year.

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17.00 – German economists see no grounds for compromise

Unsprisingly, Germany economists don’t see how Greece can remain in the Eurozone under the conditions demanded by Syriza.

Isabel Schnabel, Member, German Council of Economic Experts (Die Wirtschaftsweisen):

It is a pyrrhic victory, which threatens to end in a collapse of the Greek economy and a humanitarian disaster. Of course, you have to accept the decision of the Greeks, but the Greeks cannot decide, all of sudden, on how the taxpayers’ money of other Eurozone countries is to be spent. The negotiating position the Greeks has not improved. Quite the opposite.

Michael Heise, Chief Economist, Allianz:

The resumption of negotiations can be expected to be extremely difficult. Now it is up to the Greek government to make new proposals. From the perspective of creditor countries,  the prerequisite for new negotiations must be proposals that set out a reasonable prospect of Greece achieving a balanced budget in the near future… If Greece submits no convincing proposals, then a Grexit is mapped out.

Marcel Fratzscher, President, German Institute for Economic Research(DIW):

The Greek economy will slide in the coming months into an even deeper depression, unemployment continues to rise, and social dislocation will increase further. The outlook for an agreement on a new assistance program has become significantly worse over the referendum. I expect in the coming weeks, a complete collapse of the Greek banking system, and the introduction of a…parallel currency to the euro.

Thomas Gitzel, VP Bank:

The Eurozone is facing tough times. The Government of Alexis Tsipras will go to Brussels thumping their chests to make new demands there. The Eurogroup will make no concessions to Athens. The positions have hardened more than ever.

15.00 –  Greek Default imminent – German Vice Chancellor

Speaking earlier this afternoon, Sigmar Gabriel, German Vice Chancellor and leader of the centre-left SPD, said that it looks like a Greek  state insolvency was now imminent, and that Europe had to prepare to give Greece humanitarian assistance.

Separately, Alexander Graf Lambsdorff (FDP), Vice President of the European Parliament has called on Angela Merkel to organise a Grexit immediately. He told Neuen Osnabrücker Zeitung that a Grexit is inevitable after the no vote.

Meanwhile the German Press Agency (DPA) is reporting that Alexis Tsipras this morning spoke to both Merkel and Hollande, informing Merkel that Greece will bring new proposals to the table tomorrow.

14.29 – Podemos leader “mistake to not take in account” referendum result

Pablo Iglesias, leader of the Spanish upstart anti-austerity Podemos party, has continued congratulating Alexis Tsipras today.

The situation in Greece is the result of economic measures taken by previous governments. The Greek people support a government that offers it an alternative. One must listen to them. France and Germany would make a mistake by not keeping in mind the results of the Greek referendum

Pablo Iglesias, Podemos Leader, 6 June 2015

13.30 – Le Monde: Only Paris “leaves a hope” for Tsipras in debt talks

Le Monde’s correspondent in Brussels, Cécile Ducourtieux , writes a sympathetic piece on the need to talk about debt relief for Greece in the French paper today. She reports that Paris had prepared a proposal to this end in June, but that it was shot down by Germany.

The subject of Greek debt had hitherto been carefully avoided by the countries of the Eurozone and Athens main creditors  – with the notable exception of France. After the victory of the referendum no on Sunday 5 July, it will inevitably come to the discussion table.

Renegotiation of this debt is indeed a priority for the Greek prime minister, Alexis Tsipras and his government. Above all, it makes sense as more and more economists, and also the International Monetary Fund (IMF) believe it unreasonable to think that Greece will be able to repay the huge amount of €322bn (177% of gross domestic product) while reviving growth…

In Germany, public opinion is generally against the idea of paying a single euro more to Greece…Only France – and to some extent the European Commission –” leave a hope”  for Mr Tsipras in the words of several European sources in Athens… [In June] Paris had even prepared a draft agreement [to discuss Greek debt relief, which Commission President Juncker tried to take forward]. But their attempts were met with a ‘Nein’ from Berlin.

At Open Europe, we have long argued that Greek debt is unsustainable. However, as we have also pointed out -the counterfactual to austerity to Greece would have been fiscal transfers, which is not a route the Eurozone is not yet prepared to go down. It’s worth noting that France is the second largest creditor to Greece after Germany, even though its exposure to Greek debt has remained roughly same throughout the crisis – while the exposure of other countries has increased. See our calculations below:

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13.00 – Belgium’s Van Overtveldt -“wasn’t nice” to call us terrorists

Belgian Finance Minister Johan Van Overtveldt’s reaction is in, on Varoufakis, he said, “He complicated matters for himself. It wasn’t nice when he called colleagues terrorists.” He echoed Berlin’s line that the door for talks remains open, but that this is “not the moment to talk about debt reduction.”

From neighboring Holland, Dutch Prime Minister Mark Rutte says the No vote has complicated the situation even more. Dutch MP Mark Harbers of Rutte’s Centre Right VVD party, commented that more aid can only be granted to Greece if more savings are made than in the proposal rejected in Sunday’s referendum. Meanwhile, the Dutch opposition party CDA thinks that the ECB should now cut it emergency liquidity assistance to Greek banks.

12.30 – “Merkel has lost” – let’s talk debt restructuring, former French Education Minister

Ahead of Angela Merkel’s meeting with François Hollande this evening, Benoît Hamon, the former French Minister of Education and one-time National Secretary for Europe (French Socialists), has called on the French President to use this opportunity to regain control over Merkel and to put debt relief on the table if it means keeping Greece in the Eurozone. Speaking to Agence France Presse, he said of the Grefrendum result:

Angela Merkel has lost, Germany has lost. [It is] an opportunity for François Hollande to resume leadership.

Benoît Hamon, AFP,  6 July 2015

He added:

The nationalist and liberal forces in Europe have the same goal: remove Greece from the Eurozone, which would lead to the disintegration of Europe… We must resume talks with Athens, and address the question of the sustainability of Greek debt and debt restructuring as a part of keeping Greece in the Eurozone. François Hollande, who wanted to weigh in on the European Institutions has a historic opportunity to do so, and to put it to the Europe that is not content with budgetary coordination.

Interesting. France has been most conciliatory towards discussions of debt relief to Greece – even though most of the other Eurozone countries, particularly in Eastern and Central Europe, have lined up behind Germany. Let’s see if this develops in to a full-on Eurozone split. His comments follow remarks from French Finance Minister Michel Sapin this morning that suggested talking about debt relief for Greece should not be taboo.

12.15- Italian Prime Minister calls for discussion on ‘construction of Europe’

On his Facebook page, Matteo Renzi writes this morning that Europe needs find a definitive solution for Greece – and that it also need to have a difficult, but urgent discussion, about its construction moving forward.

There are two issues  that need to be dealt with urgently in European capitals and in Brussels. The first concerns Greece, a country that is a very difficult economic and social condition. The meetings tomorrow will have to indicate a definitive way to resolve this emergency.

The second concern is even more fascinating and complex, but can be delayed no longer-  is the construction of Europe. For months we have been insisting on discussing not only  austerity and budgets, but growth, infrastructure, common policies on migration, innovation and the environment. In a word: politics, not only parameters. And values, not just numbers.

If we remain prisoners of regulations and bureaucracies, Europe is over. Rebuilding a different Europe will not be easy after what has happened over the last few years. But this is the right moment to try to do it – all together. Italy will play its part.

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If we remain prisoners of regulations and bureaucracies, Europe is over.

Matto Renzi, 6 July 2015

12.00 – Poland wants to join the euro even less

Given massive public resistance on joining the euro, Poland has been about ten years away from joining the euro for the past ten years.  And  it won’t be joining anytime soon. (Read more here on our blog.) It’s interesting how the Greek crisis has recently taken a life of its own in Poland (see more from my colleague Pawel Swidlicki here), and anti-euro camp in Poland has offered its own vocal assement.

11.50 – Commission VP: Debt relief would have been up for discussion if second bailout completed

Speaking at the midday press briefing in Brussels, Valdis Dombroviskis, European Commission Vice President for the Euro and Social Dialogue, said that the Eurozone has 19 democracies – the implication being that democracy in Greece doesn’t outweigh democracy in the rest of the Eurozone. He added that debt relief would have been up for discussion if the second programme had been successfully completed, but that it is more difficult now that it has expired, and its conditions have not been met.

The Commission can’t really do much more until it gets a mandate from the rest of the Eurozone. So it’s now about high-level politics (attention turns to the Merkel-Hollande meet tonight, which Italian PM Renzi is reportedly not too happy about.)

11.15 – CSU’s Scheuer:Varoufakis has unleashed a wildfire in Europe

Strong words from the Andreas Scheuer, the General Secretary of Chancellor Merkel’s CSU Bavarian sister party, who yesterday said, “Goodnight Greece!” after hearing of where the referendum was headed. Today he weighs in commenting on the departure of Greek Finance Minister Yannis Varoufakis:

These lost-drivers of the left have set Greece on an irresponsible crash-course. Varoufakis has triggered a wildfire fire in Europe and is igniting the match in his hand

Andreas Scheuer, CSU General Secretary, 06 July 2015.

11.00 – German Finance Ministry: Debt-Relief Non Starter

Martin Jäger, spokesperson for the German Finance Ministry has this morning confirmed what we’ve already known. Going forward, the German government’s position on debt relief has not changed. Meanwhile Angela Merkel’s spokesperson, Steffen Seibert, said that the “door remains open” for talks but that the preconditions on which a third bailout could be considered, have not been met.

10.40 –  Sinn: The German money is lost

Speaking to N-TV this morning, prominent German Economist, Hans Werner Sinn, President of the Ifo Institute for Economic Research, and a member of the German economy ministry’s advisory council said that the German money in Greece has been lost. He warned that with the liquidity crunch in Greece – it would not be long before Athens would have to start printing a parallel currency.

The only option for Greece [if there is no more liquidity assistance from the ECB] is to start printing a parallel currency.

Hans Werner Sinn, 6 July 2015, N-TV

When asked about the €90bn euros that Germany has sent to Greece, Sinn said:

The money will never come back…The banks are insolvent because the state is insolvent. The money is lost.

Hans-Werner Sinn, 6 July 2015, N-TV

To read more about Sinn’s views of the Eurozone crisis and the policy failures in trying to solve it – and specifically his views on how to handle the Greek dilemma – see our event with Sinn last October.

10.30 – “Black day for Europe” – German Banks

The Association of German Banks (BdB) says that the risk of contagion of a  possible Grexit remains low, thanks to numerous “firewalls.” German banks have minimal commitments in Greece – it added, so that they could withdraw safely from Greece.

The Federal Association of German Public Sector Banks  (VÖB) said it was a “black day for Europe.” General Manager Liane Buchholz said that the “decision of the Greek people against further negotiations with donors, shakes the European foundation.”

10.25 – Syriza board member – “content at last”

Syriza itemprop=Syriza Board Member Giorgos Chondros has this morning been speaking to German broadcaster ZDF. Following the resignation of Finance Minister Yannis Varoufakis, he claimed that the last excuseof European Commission President  Jean-Claude Juncker and Europea Parliament President Martin Schulz had evaporated. Maybe we can discuss content at last,” he said.