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Yanis Varoufakis Resigns as Finance Minister as Greece Mulls Next Steps on Debt Germany Maintains a Hard Line on Greece Debt After Vote
(about 1 hour later)
ATHENS — Greece’s combative finance minister, Yanis Varoufakis, abruptly resigned Monday morning in what appeared to be the first move at conciliation by Prime Minister Alexis Tsipras toward the country’s creditors after Greek voters’ rejection on Sunday of a bailout linked to austerity. ATHENS — Germany maintained a hard line with Athens on Monday after Greek voters rejected Europe’s austerity policies in a referendum, intensifying pressure on Prime Minister Alexis Tsipras to restart bailout talks and opening a rift with European countries that appeared more inclined now to consider softening the push for austerity.
Mr. Varoufakis’s announcement came as leaders around Europe sent conflicting signals about whether they would continue to support Greece, and whether a compromise could still be possible on a new bailout program or on debt relief — a question with implications not only for Athens but for the broader euro currency union. As Mr. Tsipras changed his finance minister Monday and laid plans to restart bailout negotiations with creditors, however, it appeared the jubilation that followed the no vote in Greece could fade quickly as signs of financial collapse become more evident.
Greek banking executives said Monday that the country’s banks, which were supposed to reopen on Tuesday after being closed for more than a week, would remain closed until at least Wednesday. While the referendum may have lifted Mr. Tsipras’s popularity and bought some time to return to negotiations, Greek banks are almost out of cash and are expected to stay closed for at least several more days, analysts and people close to the situation in Greece said.
In Germany, the eurozone country to which Greece owes the most money and the one that has tended to take the hardest line in the debt talks, a spokesman for the Finance Ministry said Berlin saw no new basis for negotiations with Athens at this point. The spokesman for Angela Merkel, Germany’s chancellor, said that while Greece was still in the eurozone, it was up to Athens to determine whether the country would stay. The government decided on Monday that a bank holiday scheduled to end Tuesday would now be extended through Wednesday, and a daily cap on A.T.M. withdrawals of 60 euros, about $66, in place since last week, could be tightened. An announcement was expected later in the day. Long lines formed again at cash machines in Athens on Monday as people continued to take out money in dribs and drabs.
The European Central Bank decided Monday to maintain emergency loans to Greek banks at about 89 billion euros, a level that keeps them from failing but will not prevent them from running out of cash they can issue to depositors within a few days.
Ominously, the central bank also said it would tighten requirements for collateral that Greek banks must post in return for loans. The decision means that, even if the European Central Bank decides to increase the lending limit, Greek banks might not have enough collateral needed to qualify for more emergency cash.
The decision was a concession to hard liners on the central bank’s Governing Council, and a sign the central bank is worried about losses it would suffer if Greek banks fail.
If a deal for emergency financial aid or a reduction of the nation’s mountainous debt is not struck soon, Greece will probably default on international loans this month, and paying civil servants and pensioners will be increasingly problematic. Should Greece run out of euros in the absence of a deal, it could soon be forced to issue a parallel currency or i.o.u.s to pay its domestic bills, leading it out of the euro currency.
Mr. Tsipras on Monday took the first steps toward conciliation with Greece’s creditors. The combative finance minister, Yanis Varoufakis, abruptly resigned at Mr. Tsipras’s behest, and was replaced by Euclid Tsakalotos, an Oxford-educated economist who took over from Mr. Varoufakis as Greece’s lead negotiator at the end of April.
After a six-hour meeting, the leaders of Greece’s five main political parties issued a statement saying they would seek discussions with creditors to secure sufficient funds for the nation’s financing needs. They also pledged to carry out “credible reforms,” tackle unemployment and broach the issue of making Greece’s large public debt more sustainable.
Still, Germany, the eurozone country to which Greece owes the most money and the one that has tended to take the hardest line in the debt talks, warned on Monday against hopes for a quick resolution. A spokesman for the Finance Ministry said Berlin saw no new basis for negotiations with Athens at this point.
The spokesman for Angela Merkel, Germany’s chancellor, said that while Greece was still in the eurozone, it was up to Athens to determine whether the country would stay.
The Greek government said Monday afternoon that Mr. Tsipras and Ms. Merkel had spoken by telephone and had agreed that he would present new debt proposals on Tuesday, when eurozone leaders are to meet in Brussels.The Greek government said Monday afternoon that Mr. Tsipras and Ms. Merkel had spoken by telephone and had agreed that he would present new debt proposals on Tuesday, when eurozone leaders are to meet in Brussels.
Other European leaders seemed eager to avoid the specter of a Greek exit from the euro, especially since the narrative over the wisdom of austerity appeared to have shifted in popular opinion, as images of Greeks celebrating their repudiation of austerity were broadcast worldwide.
Officials in France and in Brussels said on Monday that they were unhappy and dumbfounded with the no vote, but let it be known that they would hold the door open to the possibility of a compromise between Greece and its creditors.
At a news conference in Brussels on Monday, the European Commission’s vice president for euro affairs, Valdis Dombrovskis, said that the no vote in Greece would “dramatically weaken” the country’s negotiating stand with creditors and had made things “more complicated.”At a news conference in Brussels on Monday, the European Commission’s vice president for euro affairs, Valdis Dombrovskis, said that the no vote in Greece would “dramatically weaken” the country’s negotiating stand with creditors and had made things “more complicated.”
“At the end of the day, it will produce very few or possibly no winners whatsoever,” Mr. Dombrovskis said. But now is the time to seek a way forward, he said, adding, “If all sides are working seriously, it’s possible to find a solution, even in this very complicated situation.”
But he added that now was the time to seek a way forward, and he held the door open to a possible compromise between Greece and its creditors. “If all sides are working seriously, it’s possible to find a solution, even in this very complicated situation,” Mr. Dombrovskis said. The French finance minister, Michel Sapin, said on French radio Monday that while Greece’s no vote “resolves nothing,” France could support debt relief for Greece should Mr. Tsipras come forward with a proposal containing “serious” terms for a new bailout package.
The French finance minister, Michel Sapin, said on French radio on Monday that while Greece’s no vote “resolves nothing,” France could support debt relief for Greece should Mr. Tsipras come forward with a proposal containing “serious” terms for a new bailout package. Mr. Sapin’s remarks came ahead of a meeting set for Monday evening in Paris between President François Hollande of France and Ms. Merkel to discuss how now to deal with Greece. Mr. Sapin’s remarks came ahead of a meeting set for Monday evening in Paris between President François Hollande of France and Ms. Merkel to discuss how to deal with Greece.
Mr. Tsipras may recognize that Greece has only days, if not hours, to wring some kind of deal from its creditors before full-scale economic collapse sets in. The country’s banks are on the verge of running out of euros, and Greeks could soon begin to suffer shortages of fuel and other imported goods.Mr. Tsipras may recognize that Greece has only days, if not hours, to wring some kind of deal from its creditors before full-scale economic collapse sets in. The country’s banks are on the verge of running out of euros, and Greeks could soon begin to suffer shortages of fuel and other imported goods.
“By the end of the week, we may see most A.T.M.s out of cash, massive pressure on the payment of upcoming public sector wages, tourism issues and wider economic damage,” analysts at Deutsche Bank said on Monday in a note to clients.“By the end of the week, we may see most A.T.M.s out of cash, massive pressure on the payment of upcoming public sector wages, tourism issues and wider economic damage,” analysts at Deutsche Bank said on Monday in a note to clients.
Mr. Tsipras was expected to announce a more extensive cabinet shake-up later Monday, focused on putting a more centrist negotiating team in place to deal with creditors.
To replace Mr. Varoufakis as finance minister, Mr. Tsipras has named Euclid Tsakalotos, an Oxford-educated economist who has been a deputy foreign minister and whose soft-spoken style contrasts with that of Mr. Varoufakis. In April, Mr. Tspiras had asked Mr. Tsakalotos to coordinate the debt negotiations, as other eurozone finance ministers were already showing their impatience with Mr. Varoufakis.
But the critical issue remains what proposal any new Greek team will bring to the table.But the critical issue remains what proposal any new Greek team will bring to the table.
Mr. Varoufakis, an academic with no political experience before he joined the leftist Tsipras government, had consistently argued that Greece desperately needed debt relief more than anything else. While that view was shared by many economists, he quickly became a lightning rod among Greece’s creditors for his aggressive negotiating style and heated language. Before the referendum vote, he had publicly accused the creditors of “terrorism” against his country. Mr. Varoufakis, an academic with no political experience before he joined the leftist Tsipras government, had consistently argued that Greece desperately needed debt relief more than anything else. While many economists shared that view, he quickly became a lightning rod among Greece’s creditors for his aggressive negotiating style and heated language. Before the referendum vote, he had publicly accused the creditors of “terrorism” against his country.
With Mr. Varoufakis gone, Greece’s eurozone creditors may be more willing to continue negotiations on a further aid package. His departure, apparently at the urging of Mr. Tsipras, could be seen as a concession to the sensibilities of other eurozone leaders. But the next few days could determine whether the gulf between Greece and its creditors is now too wide to bridge. With Mr. Varoufakis gone, Greece’s eurozone creditors may be more willing to continue negotiations on a further aid package. His departure could be seen as a concession to the sensibilities of other eurozone leaders. But the next few days could determine whether the gulf between Greece and its creditors is now too wide to bridge.
The Eurogroup of eurozone finance ministers, with whom Greece broke off debt talks late last month, planned to meet in Brussels on Monday afternoon to discuss an offer by Athens to resume discussions. Because the deadline for the country’s second bailout package has lapsed, any talks in the Eurogroup on Greek proposals would most likely focus on the terms for a third aid package for the country. The Eurogroup of eurozone finance ministers, with whom Greece broke off debt talks late last month, planned to meet in Brussels Monday afternoon to discuss an offer by Athens to resume discussions. Because the deadline for the country’s second bailout package has lapsed, any talks in the Eurogroup on Greek proposals would most likely focus on the terms for a third aid package for the country.
The meeting between Mr. Hollande and Ms. Merkel on Monday evening could prove crucial because, while Germany has taken the hardest line against Greece, France has shown signs of being more conciliatory. The two leaders are scheduled to make a brief statement to the news media at 7:15 p.m. in Paris, before a working dinner, after which they do not plan to make any further announcement, the French government said. The meeting between Mr. Hollande and Ms. Merkel on Monday evening could prove crucial because, while Germany has taken the hardest line against Greece, France has shown signs of being more conciliatory.
The two leaders are scheduled to make a brief statement to the news media at 7:15 p.m. in Paris before a working dinner, after which they do not plan to make any further announcement, the French government said.
Mr. Varoufakis, who announced his resignation via a Twitter message, said in a statement on his website that he was stepping down because Greece’s creditors had made it clear that they did not want to negotiate any further with him.Mr. Varoufakis, who announced his resignation via a Twitter message, said in a statement on his website that he was stepping down because Greece’s creditors had made it clear that they did not want to negotiate any further with him.
“Soon after the announcement of the referendum results, I was made aware of a certain preference by some Eurogroup participants, and assorted ‘partners,’ for my … ‘absence’ from its meetings; an idea that the prime minister judged to be potentially helpful to him in reaching an agreement,” he said. “For this reason, I am leaving the Ministry of Finance today.”“Soon after the announcement of the referendum results, I was made aware of a certain preference by some Eurogroup participants, and assorted ‘partners,’ for my … ‘absence’ from its meetings; an idea that the prime minister judged to be potentially helpful to him in reaching an agreement,” he said. “For this reason, I am leaving the Ministry of Finance today.”
Mr. Varoufakis called for the prompt conclusion of “an agreement that involves debt restructuring, less austerity, redistribution in favor of the needy and real reforms.”Mr. Varoufakis called for the prompt conclusion of “an agreement that involves debt restructuring, less austerity, redistribution in favor of the needy and real reforms.”
He included in his announcement a Parthian shot at his interlocutors in the debt negotiations, saying, “And I shall wear the creditors’ loathing with pride.” He included in his announcement a Parthian shot at his interlocutors in the debt negotiations, saying, “I shall wear the creditors’ loathing with pride.”
The French finance minister, Mr. Sapin, in his radio interview on Monday, criticized Mr. Varoufakis for the “terrorism” accusation against creditors.The French finance minister, Mr. Sapin, in his radio interview on Monday, criticized Mr. Varoufakis for the “terrorism” accusation against creditors.
“That was wrong,” Mr. Sapin said, speaking after Mr. Varoufakis announced his resignation. “This was a spirited man, who has faith. But he also made statements that were difficult to accept, especially in France, including using the term ‘terrorism.’ ” “That was wrong,” he said, speaking after Mr. Varoufakis announced his resignation. “This was a spirited man, who has faith. But he also made statements that were difficult to accept, especially in France, including using the term ‘terrorism.’”
But Mr. Sapin indicated that the French government would draw a distinction between any resentment of Mr. Varoufakis’s negotiating tactics and the problems still facing Greece.But Mr. Sapin indicated that the French government would draw a distinction between any resentment of Mr. Varoufakis’s negotiating tactics and the problems still facing Greece.
If Greece now comes back to the negotiating table with a solid plan to jump-start talks, France could be prepared to “ensure that in the early days, the early years, Greece’s debt is alleviated,” Mr. Sapin said.If Greece now comes back to the negotiating table with a solid plan to jump-start talks, France could be prepared to “ensure that in the early days, the early years, Greece’s debt is alleviated,” Mr. Sapin said.
A Greek exit from the eurozone “is not desired by the French president,” Mr. Sapin said. Nonetheless, he added, if Greece were to leave the euro, the currency bloc would not be destabilized.A Greek exit from the eurozone “is not desired by the French president,” Mr. Sapin said. Nonetheless, he added, if Greece were to leave the euro, the currency bloc would not be destabilized.